For many businesses, 2022 is about survival. It’s not about growth or increasing revenues – it’s about living to see another day. And in order to do that, you must find ways to proactively cut costs and bring your balance sheet back into the black.
These cost cutting strategies work
If you need to reduce your costs by a certain percentage – like 10 percent or even 20 percent – you’ll have to get creative. Thankfully, there are usually at least a few options for eliminating non-essential expenditures and/or getting more creative about spending.
Here are several of our favorite options for 2022 and beyond:
1. Go virtual (or hybrid)
During the height of the COVID pandemic, nearly every white-collar office job transitioned to virtual work almost overnight. It was a significant shift – and one that came with a lot of reluctance from many employers.
After all, managing workers remotely is a lot different when you aren’t face-to-face. However, since the pandemic has calmed down, many businesses have moved back to the office. But if you’re serious about slashing costs, we’d encourage you to reconsider a return to virtual work.
If you take a poll of today’s workers, most are interested in working from home at least part-time. Many would prefer to work remotely 100 percent of the time. Either way, you’re going to have the support of your staff when you make the move to a virtual or hybrid approach. You’re also going to need to save a significant amount of money.
According to research conducted by Global Workplace Analytics, having employees work half of their normal hours remotely can save your business up to $11,000 per employee per year on costs like office space, parking, office supplies, fleet management, etc. If you have a team of 30 employees, that’s a potential savings of up to $330,000 per year. (And that’s just with employees working from home two or three days per week. Going fully remote could result in even greater savings.)
2. Hire contractors over employees
While there are times when it makes sense to hire a full-time employee, there are plenty of situations where a contractor or freelancer will do. As a result, you can potentially save thousands of dollars.
According to a study by Businessweek Magazine, an employer can save as much as 30 percent on labor costs by hiring an independent contractor over a full-time employee. These savings come from avoiding costs like payroll taxes, workers’ compensation and disability, unemployment insurance, pension, health insurance, sick days, and vacation time.
3. Be smart with key cost areas
Examine key areas of your business where your expenditures are high and look for opportunities to bring these costs down. This will look different for every business, but it is usually an area where you’re expending a lot of manual effort and man-hours.
For example, in many organisations, fleet management is a key cost area. Thankfully, there are plenty of ways to lower expenses here and reduce the pressure on the business.
For instance, Gulf Relay (a shipping carrier), was able to implement Cetaris fleet management software a couple of years ago and increase warranty reimbursement by 782 percent. This represents cost savings that were previously untapped because of poor oversight on warranties related to vehicles and parts.
4. Consolidate incidentals
Most organisations are able to cut costs by up to 10 percent without making any significant changes to the organisation as a whole. One way to get to this number is by consolidating incidentals.
“Combine activities like training days and celebrations into single events. Combine events across multiple departments,” Harvard Business Review suggests. “Cross-schedule the use of outside resources, such as facilities or trainers. You’ll be surprised at the opportunities.”
Harvard Business Review uses the example of a university that determined both Homecoming and Parents’ Weekend were too valuable to be eliminated. However, by combining the events into a single weekend, they were able to cut combined costs by 40 percent. This is a large-scale example of consolidating incidentals. Are there smaller-scale ways you can do the same inside your own business?
Adding it all up
You don’t have to make major structural changes to the foundation of your business to save money. And you certainly don’t have to reconfigure your company’s DNA. Instead, by being strategic with things like office space, payroll, systems, and supplies, you can strengthen your cash flow and continue to thrive in 2022 despite difficult, uncontrollable circumstances.