What Businesses Are Doing to Cut Costs

Our readers share innovative ways to survive the economic downturn. These ideas can work for your company, too.

By the staff of The Kiplinger Letter

February 23, 2009

Cost cutting is the key to survival today. Doing it right will be crucial for tomorrow. The wrong cuts will delay a comeback when the economy turns around and demand rises.

Some layoffs may well be unavoidable, but try to keep workers needed to rebound quickly. And look for cuts you can restore rapidly.

Here’s what businesses tell us they’re doing:

• Reopening contracts, dickering over the cost of everything from ads to trash collection. One firm got its bank to lower fees by 15%. Another was able to slash its phone bills. Health care and life insurance, especially, warrant a look. Widespread layoffs mean that carriers have less business so are willing to deal.

• Paring benefits. Suspending 401(k) matches. Raising health insurance premiums, deductibles and copays. Surcharging for spouses and big families -- for smokers, too. Axing subsidies for items such as transportation. A construction outfit no longer pays for uniforms.

• Downscaling or ending employee perks. No cafeteria subsidy. Brown-bag lunch meetings instead of ordering in. No more gym memberships.

• Curbing travel. More videoconferencing -- one manufacturer saves thousands by using webinars to train sales staff. Limiting expense accounts and per diems. Insisting on discount hotels, economy rental cars, mass transit instead of taxis, etc.

• Watching energy use. Installing more efficient lighting. Ensuring that lights and computers are turned off at night. Turning down thermostats, using space heaters to supplement. Widely available free energy audits can help trim power consumption.

• Bartering -- using online marketplaces to swap goods or services for credits to buy what you need. Barter services track credits and debits and issue 1099 tax forms.

• Getting by with less. A Florida glass company sold three of its delivery trucks, using its others more. Consolidating office space. Ordering supplies only as needed.

• Repairing rather than replacing -- tools, equipment and especially vehicles.

• “In-sourcing” -- doing jobs previously farmed out. Buying a vacuum cleaner and dropping cleaning services. A day care center buys and fixes some of its own food. One firm taps workers’ hidden skills -- a moonlighting electrician is wiring a showroom.

• Shifting to a commission-only sales force. And reducing sales folks’ draws.

• Going digital and paperless. Paying bills electronically to cut postage costs. Saving on paper and printer ink by shifting to electronic files and high-speed scanners.

But be careful. Some cuts aren’t cuts at all. Skimping on liability insurance, for example, may seem wise -- until there’s an accident. Ditto on maintenance work needed for safety. And remember customer service. Loyalty is hard to win back.

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