11 Ways to Drastically Cut Business Costs

What does cost-cutting mean in business?

Cost-cutting in business typically refers to reducing the overhead costs necessary for daily operations as you provide goods or services to your customers. Cutting costs can entail the following measures:

• Laying off or firing staff members (typically a last resort)
• Reducing employee hours
• Eliminating certain employee benefits
• Outsourcing specific tasks
• Transitioning some or all employees to remote or hybrid work to lower office costs
• Reducing waste or tightening inefficiencies
• Negotiating better prices with suppliers

Companies can also cut costs by making smarter financial moves, like avoiding late-payment penalties or securing better interest rates on business loans and business credit cards.

At its core, cutting expenses is a great way to increase cash flow. It improves your company’s profitability and allows you to retain more of the revenue you generate, which is money that can be reinvested to grow and stabilize the business.

How can you cut business costs and reduce expenses?

Many businesses struggle to trim expenses without sacrificing output, lowering product quality or piling extra work onto their employees. And for small businesses running lean already, reducing costs without cutting staff can feel especially daunting.

Sometimes cost-cutting measures come with trade-offs, and in tough moments, those adjustments may be necessary to keep the business alive. But the good news is that there are plenty of ways to reduce expenses before you even think about letting people go. The right strategies can help you stabilize cash flow, protect your team and keep operations running smoothly.

1. Look for new vendors with more favorable prices and terms.

If you’ve been working with the same suppliers for years, there’s a good chance you’re leaving money on the table. Markets shift, competition grows and new vendors enter the space all the time. Taking a little time to research alternatives, even if it feels tedious at first, can uncover major cost savings if you’re not currently getting the best pricing on products or services.

You may not even need to switch vendors to save money. If you’re a long-standing customer, reach out to your current suppliers and ask about renegotiating your contract. Vendors don’t want to lose steady business, and many are willing to offer better rates, volume discounts or additional perks to keep your account.

2. Join a coworking space to reduce overhead costs.

Moving to a smaller office can lower your rent, but office relocation comes with its own costs. And if you run a small business or have teams spread across multiple cities, paying for a full office may not make financial sense anymore.

Coworking spaces offer a flexible, budget-friendly alternative. They’re great for sales teams, managers who travel often and businesses with small or hybrid teams. If most of your staff is already on a remote work plan, a coworking setup lets you pay only for the desks and amenities you need, significantly reducing administrative and facility costs.

Popular coworking providers like WeWork, IWG and Spaces offer flexible memberships that typically range from $200 to $500 per month, depending on location and amenities. And the savings can add up. Coworking Cafe’s 2024 analysis shows that in 97 percent of U.S. cities, coworking memberships cost less than leasing a traditional office, and in certain markets, businesses saved nearly 70 percent. That kind of breathing room can go straight into growth initiatives instead of rent.

3. Eliminate unnecessary perks.

Small business owners often feel pressure to match the creative perks offered by larger companies. While extras can be a nice gesture, most employees care far more about meaningful employee benefits like solid health insurance and generous paid time off (PTO) than quirky add-ons.

Take a look at what you’re spending on perks and ask whether they truly move the needle. For example, if you shell out $3,000 every December for a holiday party, you might save money — and make employees just as happy — by skipping the event and offering a small bonus instead. A streamlined celebration can still feel thoughtful without draining your budget.

It’s also worth reassessing perks reserved only for executives, such as concierge services or gym memberships. Cutting back on these exclusive benefits can reduce costs while creating a greater sense of fairness across your team.

4. Streamline your marketing efforts.

If you haven’t reviewed your marketing mix lately, you may be spending far more than you need to. Start by breaking down what you currently invest in, including both money and staff hours, across areas such as:

• Advertisements
• Public relations
• Social media marketing
• Search engine optimization (SEO) strategies
• Sponsored content
• Trade show appearances
• Direct mail

Look for areas where you invest significant money or staff hours but don’t see results. Once you identify wasteful marketing efforts, brainstorm ways to replace them with less-expensive options. For example, can you take out ads in popular trade magazines instead of traveling to trade shows? Additionally, investing in an online course to learn about social media marketing, email marketing and mobile device marketing may be more cost-effective than your current marketing strategies.

Regularly refining your marketing mix helps eliminate waste and ensures your budget is working harder for you. When you cut low-performing activities, you free up resources to put toward campaigns that actually drive revenue.

5. Outsource business tasks.

When you’re working with a tight budget, choosing an outsourcing partner can be an effective way to move your business forward without the cost of hiring full-time staff. For example, you might bring on a freelance designer to create your logo or a freelance social media manager to help promote your products at a fraction of the cost of an in-house hire.

You can also outsource smaller or time-consuming tasks, like administrative work, scheduling or content writing, to virtual assistants or freelance copywriters. This frees up your time to focus on your company’s core activities while still getting high-quality work done.

Technology can help you cut costs, too. Instead of paying a contractor or employee, you can:

• Build an online store through Shopify rather than hiring a programmer.
• Research keywords with tools like AnswerThePublic instead of paying an SEO specialist.
• Use Canva to design marketing materials, social posts or logos without needing a full-time designer.

You can often get near-professional results at a much lower price if you’re willing to invest a little time in learning a new tool. And don’t overlook the skills already around you: Employees, friends or family members may have expertise they’re happy to share.

6. Review and reassess your travel expenses.

Work travel adds up quickly. Take a close look at what your company spends on airfare, hotels, ground transportation, entertainment and meals, and then compare those expenses to the actual revenue those trips generate.

Ask yourself whether you can achieve similar results with less travel. Could a video call or virtual demo replace an in-person meeting? For the trips that truly are necessary, look for ways to rein in costs. Book flights and hotels well in advance, negotiate corporate rates where possible and set reasonable limits on entertainment and per diem spending. Small adjustments can significantly reduce your travel budget without sacrificing results.

7. Eliminate excess inventory.

While you never want to run out of products, carrying too much inventory can drain your cash flow and eat up valuable storage space. Finding the sweet spot is key. Review the sales history for each item and determine the ideal amount to keep on hand. Many of the best point-of-sale (POS) systems include inventory management tools that automate reorders and generate helpful POS reports, making it easier to stay on top of your stock levels.

Seasonal patterns and shifting consumer trends also play a big role in how much inventory you should carry. Keep an eye on these fluctuations so you’re not stuck with more product than you can move. And if you do end up with excess inventory, turn it into an opportunity: Hold a sale, bundle slow movers with popular items or use promotional giveaways to clear space and recapture some of your investment.

8. Bundle purchases or join a buying group.

If your company has multiple departments or several business locations that order supplies independently, you may be missing out on easy savings. Consolidating those purchases into a single bulk order can prevent overbuying and help you qualify for volume discounts that individual orders wouldn’t unlock.

Another smart way to reduce costs is to join (or form) a buying group with other businesses in your area or industry. These groups pool their purchasing power so members can access lower supplier prices typically reserved for large-volume buyers. The group places a collective order, secures the discount and then distributes the products to each participating business. It’s a simple way to stretch your budget without sacrificing quality.

9. Streamline financial outlays.

Financial outlays are one of the most overlooked areas when businesses look to cut costs. But tightening up how you spend and manage money can have a significant impact on your bottom line. Start by taking a closer look at the following:

• Insurance: Note your small business insurance costs. Review your policies and call your insurance company to determine if your coverage levels are optimal. Inquire about discounts. For example, can you bundle commercial auto insurance and general liability insurance to save money? If your current insurer doesn’t provide any cost-saving options, ask your business insurance broker about obtaining quotes from other companies.
• Business loans: If you’re carrying business debt, it’s worth asking your lender whether a lower rate is possible, especially if your credit score or profitability has improved. If that’s not an option, refinancing at a better rate could help you cut long-term interest costs. You can also keep your existing loan and make extra payments toward the principal each month to chip away at the total interest you’ll owe.
• Credit cards: Smart business credit card management can also save money. Paying your full balance each month helps you avoid interest charges. If that’s not possible, look into transferring balances from high-interest cards to lower-interest alternatives. Cash-back cards can also offset expenses and help reduce your overall balance.

10. Improve productivity.

When you or your employees waste time, your business loses money, plain and simple. Fewer bottlenecks and distractions improve productivity, bringing more output without increasing labor costs. Start by eliminating bureaucracy and busywork, like overly long meetings, redundant approvals or reports no one actually uses.

Next, make sure your team has the right tools to stay organized and aligned. Top project management and collaboration platforms help everyone understand their responsibilities, track progress and avoid rework. Look closely at your internal processes, too. Are there steps you can simplify or automate? Are systems integrated, or are people constantly switching between tools?

Streamlining workflows and giving employees seamless, well-connected technology can dramatically improve productivity and reduce costs without adding pressure to your team.

11. Boost employee retention.

When employees leave, it hits your bottom line hard. According to SHRM research, the average direct cost to hire a new employee is around $4,700, and that’s only the starting point. Replacing an existing employee typically costs much more when you account for lost productivity, the slowdown during onboarding, recruiting time and the extra pressure placed on the rest of your team. You might even have to offer a higher salary to stay competitive in today’s job market. And according to SmartRecruiters’ 2025 Recruiting Benchmarks report, it takes about 38 days for a business to fill an open position, meaning more than a month of lost productivity and added pressure on your existing team while you search for the right replacement.

Retaining your best employees is one of the most effective cost-saving strategies you have. You avoid the financial hit of turnover, preserve institutional knowledge and ensure competitors don’t benefit from your team’s skills. Strong employee retention strategies include offering competitive pay and benefits, improving wellness and work-life balance, and communicating regularly with employees to make sure they feel supported.

What benefits can businesses see from cost-cutting?

If your company is facing financial challenges, reducing expenses may be necessary just to stay afloat. But even financially stable businesses can gain a lot from smart cost-cutting. Trimming unnecessary spending creates breathing room in your budget and opens up new opportunities.

Here are some of the biggest benefits:

• Improved cash flow: Lower expenses reduce the risk of running into cash flow shortages down the road.
• Room for investment: Money saved can be reinvested into product improvements, new services or operational upgrades.
• More flexibility to outsource: Cutting costs frees up cash that can be used to outsource time-consuming tasks or hire additional help when needed.
• Revenue growth opportunities: Savings can be redirected to marketing, sales or other revenue-generating activities.
• Higher profit margins: Every dollar you don’t spend directly boosts your margin.
• Pricing advantages: Lower operating costs may allow you to offer more competitive pricing, helping you stand out in your market.

Any time you reduce operational costs, you free up more resources to reinvest in your business, strengthening stability today and creating more opportunities for growth tomorrow.

Cost-cutting is an ongoing consideration

Cost-cutting shouldn’t be something you revisit only when profits dip. It’s an ongoing discipline that helps you stay nimble in a marketplace full of new tools, competitors and technologies constantly reshaping how business gets done.

Looking for creative ways to lower overhead not only strengthens your competitive edge, it also reduces the odds that cash flow problems will catch you off guard. Make it a habit to review your budget regularly (at least once a quarter) and identify areas where you can trim expenses, renegotiate contracts or streamline processes. Small adjustments add up, and the businesses that keep an eye on costs year-round are the ones best positioned to grow and adapt.

Jennifer Dublino and Max Freedman contributed to this article.