A Thoughtful Approach to Business Expense Reduction

Last Updated on February 25, 2025 by Dave Schoenbeck

Companies have dozens of cost-cutting strategies, but which is the best for you?

Unfortunately, business expense reduction is not an overnight process. However, with thoughtful planning and a long-term focus, you can reduce costs without sacrificing or affecting the normal functions of your business.

With the potential for a recession, increased interest rates, reduced bond rates, and more, the economy (and your business) is in flux. Read on to learn about tracking expenses, valuing time, and growing your business.

Nice to Have vs. Have to Have

Consider the “fat vs. muscle” approach with your business expense reduction strategy. Removing some fat is OK since it is not as sustaining as muscle. However, sometimes muscle also has to be trimmed. If you’re unsure how to balance expense control with the need to maintain the business in the future, consider which parts of your business are muscle and which are bone.

A high-profile office is impressive, but you might only need a first-floor office for your skeleton crew. You might want your most qualified employees on site every day, but you need to have motivated employees who have a work-life balance and have become accustomed to working from home. You will pay a premium for the penthouse and a premium for qualified and motivated onsite staff.

Business Expense Reduction Examples

Often, examples are a great way to understand the value of a strategy, and no example is more relevant than COVID-19 and shifting workplaces. 

Over the past few years, companies have effectively reduced costs by letting employees work from home. This saves on work footprints and the associated expenses of heating, cooling, cleaning, and maintaining a physical office. The reduced garbage, maintenance, and utility costs cannot be overlooked.  However, there is likely a considerable loss of productivity that should be considered.

Cash flow management is essential at any company growth stage—more money in, less out. However, not all money out should be reduced. Consider marketing, sales training, and morale-boosting programs. Most of these programs show returns within a year, so the effects of an immediate cut might not be seen for up to 12 months. 

Here are ways to look at your organizational health as you consider your business expense reduction:

• Track every expense carefully – you cannot gain insights into your spending without an accurate picture of your spending
• Learn from your competitors and industry – Learning from others’ mistakes is more straightforward than recovering from your own.
• Challenge every fixed cost – try to renegotiate your lease, fleet, or insurance.
• Tight scrutiny on your variable costs – phone, Internet, trash, heating, and cooling

Business Expense Reduction Tips

There is no one-size-fits-all approach to reducing your expenses. Every business is unique and requires different solutions. Further, you cannot permanently “save” your way to success — making money takes money. Business expense reduction is smart when there are expenses to cut — not when they generate revenue.

If you’re wondering how to lower business expenses, consider these tips:

• First, control your credit – Keep your spending below 30% of your overall credit limit, and always pay your bills on time.
• Hire a professional –  They likely know the ins and outs of business loans and grants or can direct you to someone who specializes in them.  Seriously, consider refinancing your debt.
• Be more innovative – Companies that can save more than they spend can benefit from “emergency funds,” but spending intelligently now can save them more significant sums later.
• Use technology. Financial platforms can help you understand your company’s health, make intelligent hires, or consolidate where necessary. Consider eliminating hard-wired phones and switching to VOIP phone capability.
• Shop your Insurance Coverage – Insurance agents know changing brokers is disruptive.  Consequently, premiums go up.  You are leaving money on the table if you don’t get yearly quotes.
•  Reduce Cell Phone Payments – Consider reducing the cell phone payments to employees.
• Relocate Your Business – Find a more affordable building or office or renegotiate your lease.
• Sublease Extra Space – Downsize your physical footprint and find a tenant.
• Sell Unused Assets – Sell old equipment, furniture, fixtures, raw materials, vehicles, and partially finished goods.
• Consider a 3PL – Evaluate using a third-party logistics firm vs. doing it in-house.
• Cost vs. Benefit Review: Before adding any new products to your assortment, conduct a thorough cost vs. benefit analysis.
• Downsize Your Team – Consider a reduction in force downsize plan.
• Eliminate All Overtime – No overtime allowed unless approved by top management.
• Brainstorm Ideas – Gather a group of your best workers and ask them for ideas to trim costs.
• Stop Purchasing New Equipment – Until profits stabilize, repair equipment and defer buying new. Rent out capacity on your machines to outside firms.  Eliminate all equipment rentals that aren’t critical.
• Review all Marketing and Selling expenses. Focus on effectiveness and faster returns compared to longer-term brand building.  Shift from traditional outbound marketing to an inbound digital strategy.
• Employees vs. Contractors – Decide whether to eliminate outside contractors or reduce employees and outsource to contractors.
• Review all Subscriptions – Decide if you need all of the subscriptions.  Focus on technology and applications first.
• Tighten Expense Reports – Scrutinize employee expense reports and consider limiting non-essential travel costs.
• Limit Donations – Suspend all business donations until cash flow improves.

A promising sign of organizational health is a healthy balance sheet. “More money in, less money out” is a great motto. However, you cannot move to a zero-spend model without sacrificing your long-term business. For more help on how to lower business costs, contact us today for small business coaching. Click here to sign up for my free weekly blog articles.

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Dave Schoenbeck

CEO at Dave Schoenbeck - Business & Executive Coach

Dave Schoenbeck is a professional business and executive coach who translates complex business methods, processes, and strategies into actionable plans to dramatically improve financial results. Read more about Dave here.

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