The “winter” in tech is still progressing. And while it’s unclear how long relative inactivity will last, businesses are forced to cut budgets. We’ve been witnessing waves of layoffs since 2020, with tech giants letting go thousands of people and venture firms freezing investments.
While layoffs are a common approach to cost reduction, they’re not the only way to save money. So, how to cut costs in a company that doesn’t want to put business growth on pause? We’ve gathered some simple but effective strategies to cut expenses that don’t require significant changes in team composition or business processes.
Review your subscriptions
By auditing subscriptions, you can eliminate redundant services, avoid overpaying for underused tools, and ensure that they are only paying for what truly supports their needs. List all the tools and services your team uses to audit all active subscriptions. Check for identical and resemblant solutions. Opt for a compromise and cancel the rest. If possible, downgrade to plans that better match your current needs. Use discounts offered for yearly plans for the critical tools and services.
Pro tip: Set a recurring reminder to review subscriptions every six months. This ensures that you’re staying on top of any new services and can adjust your plan according to changing needs.
Replace legacy systems
Invest in better software. It may seem the opposite of cost reduction measures. Yet, it is a strategic decision that guarantees the economy in the long term. As a rule, legacy systems are costly to maintain. They call for specialized support. They can’t integrate with modern tools and are prone to breakdowns. Meanwhile, replacing them with new solutions enables scalability. It immediately enhances performance across departments. Although upgrading systems requires an initial investment, the long-term savings from reduced maintenance costs, improved efficiency, and fewer breakdowns make it a cost-effective strategy.
Pro tip: Conduct a cost-benefit analysis before making the switch. Sometimes upgrading incrementally can offer a better return on investment compared to replacing everything at once.
Switch to cloud-based tools
With migration to cloud-based platforms, you won’t need to invest in physical infrastructure. Besides reducing hardware maintenance costs, cloud solutions offer flexible pricing models. They scale with your requirements. For example, per-pay-use plans adjust to the company’s business needs at every given moment. It provides remote teams with easier access to data and tools. Altogether, it improves collaboration and effectiveness.
Pro tip: Start with a hybrid approach – migrate less critical functions to the cloud first to ensure a smooth transition without disrupting business operations.
Explore software alternatives
Nowadays, you can find cheaper alternatives for most tools. Free or open-source software can replace costly paid tools, offering similar functionality without the ongoing subscription fees. Just check if the alternatives you consider integrate with other, non-replaceable applications. And ensure they meet your security requirements before migrating.
Pro tip: Before fully switching to a free or open-source tool, test it with a small team to make sure it integrates well with your existing systems and meets security standards.
Consider IT outstaffing
IT outstaffing extends the talent pool during hiring. It opens access to skilled professionals who aren’t available for office-only offers. And it’s not even the best thing about this cooperation model. Outstaffing allows you to reduce business expenses without giving up quality. Outstaffing usually entails cooperation with remote and offshore professionals. They request lower compensation only due to the logistics and job market trends in that area.
Pro tip: Partner with outstaffing firms that specialize in your industry or required tech stack to ensure quicker onboarding and a smoother integration of remote professionals into your existing team.
Reduce the budget for business travel
There are various advanced video conferencing tools and virtual collaboration platforms available. These tools eliminate the need for costly flights, hotel stays, and other travel-related expenses. So, there’s hardly a meeting that cannot be conducted remotely. Establish clear travel policies prioritizing virtual interactions for non-critical or routine matters. Reserve travel for high-impact situations like major client meetings or industry conferences.
Pro tip: Implement a travel approval process to ensure that only essential business travel is authorized, making it easier to assess whether the trip can be replaced by a virtual meeting.
Encourage remote or hybrid work
Does it make sense to still require a full-time presence at the office? Let’s see. Full-time office workers change companies more often than hybrid and remote workers. It’s 24% compared to 17% of respondents. One in four people will sacrifice 15% of their annual salary for flexible working hours. Meanwhile, fully or partially remote work will reduce office space and utilities expenses.
Pro tip: Invest in technology that supports remote collaboration, such as cloud-based project management tools and video conferencing software, to ensure productivity remains high despite fewer in-office hours.
Optimize your marketing spending
As a rule of thumb, B2B firms should spend 2–5% of their revenue on marketing. The numbers for the B2C sector are slightly higher – around 5-10%. Given the necessity to cut costs, higher marketing budgets are unlikely. So, analyze the ROI of the marketing channels you use. Cut back on underperforming campaigns. Focus on those delivering the best results. Explore strategies like social media, SEO, and email marketing.
Pro tip: Use A/B testing to refine your marketing campaigns and ensure that every dollar spent is directed toward strategies with the highest ROI.
Reassess your offerings
How can reviewing your product or service lineup be a cost-cutting strategy? It is a way to identify items with low demand or profitability. With this data, you can reallocate resources to more profitable areas. At the same time, you can lower production and storage costs. The same goes for expenses on marketing less popular items.
Pro tip: Regularly collect feedback from customers to understand which products or services are most in demand, and discontinue underperforming offerings to allocate resources more efficiently.
Optimize inventory management
Excess inventory ties up cash and adds storage costs. What’s worse, shortages can disrupt operations. Cost reduction solutions that can fix it revolve around better corporate software. Implement inventory management systems to track stock levels in real time. It will allow your team to forecast demand accurately and maintain the right amount of inventory.
Pro tip: Implement just-in-time (JIT) inventory strategies to minimize excess stock while ensuring you meet customer demand, reducing storage and holding costs.
Look into government incentives
One of the best cost reduction strategies is using government incentives and tax credits. Governments offer grants, tax credits, or subsidies for various purposes. Businesses get bonuses for adopting green practices. Companies can be rewarded for investing in research and development or creating jobs. Task your financial or legal experts with finding the right program that aligns with your broader business goals.
Pro tip: Set up alerts for new government programs or incentives that apply to your industry. An up-to-date knowledge of available tax breaks can help ensure you don’t miss valuable opportunities.
Automate repetitive tasks
The data on the value of automation varies across industries. For example, McKinsey suggests it’s already possible to automate up to 70% of business activities in banking. The company identified 63 generative AI use cases spanning 16 business functions. Regardless of the industry, automating data entry, payroll processing, or customer service inquiries reduce human error and f