Many startups and small businesses find that despite making numerous changes, their profitability continues to be on the decline against escalating business costs. This puts a significant amount of pressure on the company’s balance sheets. In situations such as these, it may seem like firing employees is the only workable solution to reduce costs. But before you take this step, read ahead…
The fact is that there is great value in keeping your existing team in place. It can prove to be very difficult and expensive to reassemble talent. There are of course some moral and ethical considerations that come into the picture as well. This makes it important to take a 360° view of the situation before you consider laying off any employees in an effort to reduce costs in your business.
#1 Involve employees in decision making
Tough days impact every person in an organisation and you need to ensure your staff is well aware of this fact. When your business is going through a rough patch, involve them in the decision making and solicit suggestions from them about how to minimise costs. While all the suggestions they make may not be practical or feasible at that point in time, it will ensure they feel more accountable for their actions, and better connected to their work. Check out tips to encourage low-cost behaviour from your employees.
#2 Avoid all extra expenses
When you are trying to cut costs in your business, you need to make a conscious effort to curb expenses such as new bonuses, office parties, team outings and business trips. Cutting down these extra costs may not have a major impact on your balance sheet; however, something is definitely better than nothing, and it’s important to axe these costs without delay.
#3 Mandatory extra leaves with no pay
It may seem very unfair to ask your staff members to take time off from their jobs and spend time vacationing or on leisure activities. But these unpaid leaves will help you save significant costs and will allow your staff to relook at their strengths and weaknesses.
#4 Reduce work hours
If you are unable to pay out full salaries to your staff, look for options where you don’t need to fire them. For example, you can reduce weekly work hours and save some money every month. You can temporarily switch from a 5-day work week model to a three or four-day week format. This can give them the scope to take up some freelance works to cover up for loss of earning, or they can use that time to pursue some hobbies.
#5 Cut senior management salaries and bonuses
When you are facing a difficult time with managing your business finances, you can do much more than pressurizing employees. You should also consider cutting annual salaries of the Chief Executive Officer, the CFO, CIO as well as other high-level management executives within your organisation. These cuts will help your business run very seamlessly without having to opt for any mass employee layoffs.
#6 Virtual office option
This is another effective cost-cutting measure you should consider. Except for a few main employees without whom the business can’t function, request the rest of the staff to work out of their homes. This frees up space on your office premises and you can rent it out so you have an extra source of income. You also have the option to operate out of a rented space as it will help you cut monthly expenses substantially,
For effective and sustainable cost reduction strategies & efficiencies that will increase your bottom line, contact the experts at Benchmark Cost Solutions at this number – 02 9525 0777. If you prefer, write to us at this email address, and we will revert quickly.
Thanks for reading,
Benchmark Cost Solutions Team
02 9525 0777