1. The Challenge of Reducing Operating Costs
Every business at one time or another decides it needs to reduce the operating costs. In these
tough economic times, doing more for less seems to be the motto of most companies. However,
it’s a balancing act. On one hand, you want to grow your company. On the other hand, the
demand to reduce costs is ongoing. You need to find a way to do both at the same time. It’s
tricky to develop a strategy to reduce operating costs while not compromising the potential for
growth. Identify where you can improve efficiency, consolidate or trim non-core functions, and
then take those savings and reinvest them in critical assets for your business. You will need to
have your employees on board for this to work.
Many companies are quick to outsource. That’s because non-core functions such as payroll,
billing, and human resource functions can be outsourced without hurting the company. Some
companies even outsource operating processes. What you need to understand is that while
outsourcing may be the right choice for your company it also opens you up to risks you would
not otherwise be exposed to. For example, an impolite customer service rep, or an inferior
supplier can do a lot of damage to your company very quickly. So before you choose
outsourcing to reduce operating costs, make sure you weigh all the pros and cons.
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However you decide to proceed you need to be cautious. You need to evaluate all avenues of
cost reduction from planning to implementing. Don’t be afraid to bring on board someone who
is experienced in these matters. When reducing operating costs you must consider the following:
 Taxes
 Outsourcing
 Location planning
 Employee benefits
 Employee compensation
 Capital structuring
 Cost of capital
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2.  Downsizing
 Effectiveness of IT
 Financial function
 Global supply chain
There are so many ways to reduce operating costs. Sometimes it’s the smallest change that can
have the largest impact. So leave no turn unturned. Examine every aspect of your business.
Dissect each under a microscope. For example, look at your office supplies. Can you cut the
cost of your pens, your paper, etc? Go through your office thoroughly.
Then move into employees. Can you cut overtime, benefits, number of man-hours? Can you
reduce the number of staff or the number of hours? Perhaps you have too much overlapping on
shifts. From there you can move into your IT department, and then onto operations.
Reducing your operating costs can be a challenge, but it’s worth all your effort to see better
profits.
© 2011 Apptivo Inc. All rights reserved.