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How to Think About Expense Reduction in your Business

Written by Gary Williams
October 19, 2018
cost reduction in your business

Every company has to think about expense reduction in your business at some point. At least they should.

After all, it’s easier to increase revenue by expense reduction than increasing sales. Theoretically you control your company’s costs right?

The economy of the last seven or eight years has made many of us expense reduction experts by accident.

We have all done the “easy” stuff. What’s the easy stuff? Payroll.

Of course it’s not easy to downsize your staff, but if you’re still in business after the worst economy in our country’s history you have done it. Expense reduction in this area, which typically accounts for two-thirds of total expenses is a big win for the bottom line.

cost efficiency

However, as you contemplate the full range of cost cuts available—including painful staff reductions — eliminating excess G&A (General &Administrative) expenditures opens up a new source of substantial, sustainable contributions to the bottom line.

If your company’s G&A costs are 15% of your gross revenue, and your revenue is $50 million, you’re spending $7.5 million annually on indirect costs.

If you decreased that expenditure by 20%, you would save $1.5 million annually. Not chump change right? It’s easier than you might think.

For companies faced with an extraordinarily challenging sales environment, a cost reduction of this magnitude can create a welcome compensating effect. In fact, an expense reduction of 20% could save jobs.

From personal experience with consulting clients over the last few years, finding expense reduction opportunities is way easier than it should be. When business is good who cares what a pencil costs?

The time to review and take charge of your costs is now, before it’s absolutely needed, before it’s a critical decision.

expense reduction analystsExpense reduction should be a part of your day to day business practice. If you can’t effectively do it yourself, there are a number of organizations that specialize in just that. Check out Expense Reduction Analysts. One of the best, worldwide and based in Dallas, TX here in the United States.

Now it’s the weekend. What to do with all that newly found money from cutting costs?

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