Las Vegas Small Business – Cost Reduction and Cost Savings
Cost Reduction is a must for higher profits. There are Fixed and Variable Costs. Both types of costs must be managed below industry average cost.
Small Business and Startup always don’t know when they may need Cost Reduction and/or when a high Cost problem may “pop up”. But when need arises, it is better for Small Business and Startup to go to the known and qualified lower costs solutions providers.
There are many ways to reduce fixed and variable cost:
- Lower Labor Cost – Automate repetitive processes
- Outsourcing to lower cost countries like India, China.
- Do Product and Process Innovation continuously
- Remove obsolete products and services, replace them with new ones
- Implement new technologies like robotics, IT, Communications, etc.
- Better procurement of parts with lower prices
- Higher efficiencies – Manufacturing, Services, etc.
- Lower capital cost – Refinance, Stop borrowing, lower Credit Card debt, etc.
- Higher Productivity = Cost / Process Step
- Smart Employees = Educated, Trained, Experienced, Knowledgeable
- Pass cost on to Customers i.e. let customer do things you do in-house
- Reduce distribution cost
- Go Online
Creating sustainable low cost advantage increases competitiveness!
Another challenge is balancing between reducing cost and increasing revenue.
Increasing Revenue, Profit and Market share require major investment in many areas such as marketing, new products development, human resources, market expansion, etc. Investment affects current year profits but increase odds of higher profits in the future. There is a much higher priority issue i.e. Creating ongoing Cost Advantage which is a strategic advantage. Reducing cost is a tactical issue.