Updated: Nov 5, 2020
Before getting to the stage where eliminating jobs becomes necessary for survival, here are five ways you can control costs without eliminating jobs.
1. Push back new hire dates
For example, on a role with an annual salary of $60k, you will save $5k per month by delaying the hire date. Add 30% of savings on overhead onto this and for each hire, each month you delay will save $6,500.
2. Eliminate new hires altogether
If you can eliminate new roles altogether, you can help prevent eliminating current roles. Ask yourself if the new roles will directly increase revenues or reduce costs. If the answer is no, cut those first.
3. Eliminate non-essential costs
Review your non-employee costs such as travel, entertainment, training, professional services, office supplies, etc. Ask yourself if you would really lose revenue or profit if you eliminated the cost. If you can't figure it out, then chances are you don't need the cost.
4. Eliminate other wasteful activities
This is a great time to step back and create a "stop doing" list for your organization, and for yourself personally. Human beings are creatures of habit, and we often do things because we (or someone else) have always done them.
Review your calendar, priorities, and tasks and ask: What are we solving for? What would the impact be if we stopped doing this?
Stop spending time in meetings and on activities that don't matter.
5. Improve your cash management
"Revenue is vanity, Profit is sanity, Cash is king."
While not a direct way to reduce costs, optimally managing your cash flow will increase your cash reserves and relieve some pressure. Cash is the lifeblood of any business. Yet many leaders focus too much on revenue as a vanity metric. Cash is vital to weathering economic downturns.
Calculate your cash conversion cycle to see how long it takes for a dollar to work its way through your business and back into your pocket. Actively manage your AP and AR on a weekly basis to drive improvements to your cash flow.
Please share your own tactics for preserving jobs while weathering a downturn in the comments below.