Cutting Corners to Increase Profits

When a company needs to reduce expenses without impacting quality or growth, there are a number of strategies to employ . First, a reduction of all non-essential marketing programs can deliver the desired end result because that is often the most intangible return on investment.

Another method for reducing expenses as painlessly as possible is looking to outsource some of the non-essential functions within the company. Deferring new hires for three months or so, or reducing travel expenses are two more temporary fixes to a problem with overblown expenses.

However, in my opinion, temporary measures of increasing profits or reducing expenses do not make sense. Instead, the company and the CEO must look to make larger structural changes in the company or its ways of conducting business so that the benefits accrue year after year. Trying to make short- term changes to boost profits is a waste of time because the cost will resurface in the future. It is far better to spend time and energy for making permanent reductions in cost through structural changes.

Finally, if a small company arrives at a stage where it has to cut costs, that by itself means that there is a problem in the management of the company. Costs must not be allowed to ratchet up in the first place unless they are absolutely essential. If they are absolutely essential they cannot be cut by definition.