Everything else that’s “nice to have” can potentially be cut. If we want to cut costs radically, we should look at what our businesses need to exist. Every business spends some money on things that aren’t strictly necessary but that make life easier. What are the costs your business can’t do without? For example, you might not need that premium e-learning subscription right now, but you definitely need an internet connection. In this case, you may want to consider reducing your costs permanently.

Create structural change: The costs of running your business are generally high, leaving you with little chance to build up a safety buffer.

Until then, reducing your expenses temporarily will help keep your company running while you wait things out.

Bridge the gap: Your business is in reasonably good health and new income is on the way.

These will help you decide whether your cost-cutting strategy needs to:

Think about your answers to the timing questions above. Look back at previous years, whether you run a brick-and-mortar or an online store you probably get more orders at specific times of year.ĭo you need temporary savings or long-term cuts?

Do you expect your financial situation to change? You might have a tax refund coming or expect the peak season for your product to pick up soon.

Calculate how long your business can run based on your current funds and remaining income.

How long will your company’s financial buffer last? Have an honest look at your bank balance.

Making smart choices starts with a realistic timeline. Any actions you take should be based on your knowledge of your own company and we always recommend speaking to a financial advisor if you’re not sure.

In this article, we’ll give some suggestions on how to approach cutting costs.

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