Watching this week’s poll results brought up a few ideas…

In the current tight times, with sales being down for some, many of us are faced with the need to reduce our costs as a way to ensure we remain profitable and can see this storm through.  However, cutting costs on the wrong items can lead to disastrous results in the long term. Careful consideration is needed on exactly what costs to cut and what NOT to cut. Let’s look at a couple of areas to consider in this equation.

Business Owner Salaries – often this is one of the first things to cut and often overlooked.  Provided you as a business owner are financially stable yourself, its better in the long run to look at reducing your own salary before that of your staff.  Your accountant may advise you to reduce your salary on paper, and pushing some of it into a business loan account where the business will be able to pay you back once the good times return.  This has the effect of increasing cash at hand in the business now.  I’ve done this on more than one occasion and it’s worked well.

Employees’ remuneration – in tough times, you want your employees motivated to focus on your business.  A staff member whose pay has been slashed tend not to focus on doing good work, instead they often focus on finding another job.  Not a good scenario for your business at all as this will really affect you.  Instead if you really have to cut their pay look instead at letting a staff member go so as to not affect the morale of your entire crew.

I’ve heard of some companies cutting out tea, coffee and even tissues in the workplace so as to cut costs. I believe that these are certainly the wrong things to do as they too lead to unhappy staff.  Unhappy staff doesn’t work effectively and certainly can be a liability to your business.  Watch out.

What would you cut, and why?