Cutting costs the lean way: a guide

Explore how small businesses can trim expenses and boost efficiency with this guide on cutting costs the lean way.

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There will often come a moment in your business life when the need to trim costs becomes a pressing reality. How much it costs to pay your staff, run your fleet, or keep your lights will impact your overall cost of goods sold, no matter what industry you’re in. And it all has the potential to become highly expensive at times like these.

You may find yourself at that juncture where you realise every pound saved can make a significant difference. 

On top of that, we know you’ll grapple with the concern of ensuring that these cost-saving measures don’t jeopardise the quality and integrity of your offerings. It’s a challenge many small business owners face, and it’s one that we understand intimately. 

In these uncertain economic times, we’re here to guide you through the process of cost-cutting, helping you balance financial prudence while also delivering excellence. 

So today, let’s explore ten practical strategies that will empower your small business to thrive.

Startups “lean business” series

Our insightful Lean Business series is where we unravel the secrets of efficiency, innovation, and sustainable success. Whether you’re a seasoned entrepreneur or just starting your business journey, these articles will serve as your roadmap to understanding and applying the principles of Lean thinking in practical ways.

We’ll delve into the core concepts, share real-world examples, and offer actionable tips to help you streamline your operations, eliminate waste and extraneous costs, and cultivate a culture of continuous improvement.

Join us as we embark on a journey to transform the way you think about and run your business, one Lean concept at a time. For all posts in the series, click here.

1. Audit your expenses

One of the initial steps in this cost-cutting journey is to conduct a thorough audit of your expenses. 

This involves closely examining your company’s financial statements (such as your cash flow forecast and estimated projections in your business plan) to identify areas where expenditures can be reduced. 

To prioritise these potential cuts, it’s helpful to categorise expenses into essential and non-essential categories. 

This way, you can focus your efforts on the areas that will have the most significant impact on your bottom line without compromising essential aspects of your operations.

2. Embrace technology

Embracing technology is pivotal in the quest for cost reduction within your small business – even though it may seem like new tech itself has initial overheads. 

One notable aspect of this technological embrace involves investing in cost-effective software solutions. For instance, adopting advanced accounting software can revolutionise your financial management processes, automating tasks like invoicing, expense tracking, and financial reporting. This not only saves time but also reduces the potential for human errors, consequently trimming operational costs.

The integration of project management software can enhance your team’s efficiency and project delivery. This software facilitates collaboration, task assignment, and project tracking, allowing your workforce to manage tasks more effectively. You can optimise resource allocation and minimise project delays by streamlining project workflows, ultimately translating into cost savings.

In addition to software applications, leveraging cloud computing is another strategic move for small businesses. Cloud-based platforms, including website builders that let you design and host your business site for under £100 per year, eliminate the need for you to hold on-premises hardware and therefore also alleviate the associated maintenance costs. Cloud services offer scalable solutions that can grow with your business and ensure a practical and cost-efficient approach to data storage and processing from anywhere.

3. Outsource wisely

Outsourcing certain functions is a smart strategy for small businesses looking to cut costs. 

Non-core functions like customer support, payroll services, accounting, HR services or IT services can often be outsourced to experts in those fields. This reduces the workload on in-house staff and can save on your total costs

Freelance platforms can also provide access to skilled professionals for one-off projects or specific tasks.

4. Remote work

Implementing remote work policies is not only a response to the changing work landscape but also a cost-saving measure. 

Allowing employees to work remotely can reduce office space, utilities, and commuting costs. 

Findings by Bright Network confirm that young and talented professionals highly value hybrid or fully remote working arrangements. They seek flexibility in how, where, and when they perform their tasks for their employers.

When organisations demonstrate an understanding of the nuanced needs of their teams and offer tailored work solutions, it fosters a sense of loyalty and commitment among employees. They are more likely to stay with an organisation that values their preferences and supports their professional growth. 

And with better employee retention, you can save on the considerable recruitment costs of finding and onboarding new staff members.

5. Energy efficiency

Energy efficiency is another area where small businesses can make substantial savings, especially with the rising business energy costs of recent times. 

Consider upgrading lighting and HVAC systems to energy-efficient alternatives. Additionally, encourage employees to adopt energy-saving habits such as turning off lights and equipment when not in use, which can result in lower utility bills. 

Related reading – small business options to ride out the energy storm.

Negotiating with suppliers has the potential to generate significant cost savings for your business. 

It is essential to adopt a proactive approach by consistently reviewing your vendor contracts and engaging in negotiations to secure more favourable terms, discounts, or bulk purchase arrangements. 

Through cultivating and maintaining robust vendor relationships, you can maximise the value you receive, ensuring that your business benefits from the most advantageous arrangements available.

7. Employee training

Investing in employee training represents a strategic decision that can yield long-term cost reductions for your business. 

Through the enhancement of your employees’ skills and productivity, you may discover a reduced need for additional hiring, while adding a welcome employee benefit

Cross-training your employees to manage multiple roles contributes to a more flexible workforce too, ensuring your company’s adaptability in meeting various operational demands.

Marketing is undeniably vital for attracting and retaining customers. But, efficient marketing spend is crucial to avoid wasting time and money. 

Consider the power of digital marketing strategies, such as targeted social media advertising, email marketing campaigns, and search engine optimisation (SEO). These approaches enable you to reach a broader audience even when working with a relatively modest budget. 

To ensure that you’re making the most of your marketing investments, it’s crucial to regularly analyse your marketing return on investment (ROI). For instance, if you find that your email marketing campaign generates a higher ROI compared to your print advertising efforts, you can shift resources towards the more profitable channel. 

Similarly, if SEO is driving a substantial portion of your online traffic to your business website, allocating more funds to enhance your website’s search engine ranking could be a wise decision. 

9. Inventory management

Effective inventory management offers small businesses a valuable opportunity to control costs. 

By adopting just-in-time inventory practices, you can significantly reduce storage expenses and avoid the burden of overstocking. 

This approach involves closely monitoring and forecasting demand to ensure that your business always maintains the optimal level of inventory on hand. 

Here’s a deeper look into just-in-time inventory management.

10. Refinancing and debt consolidation

Lastly, consider exploring refinancing options such as business loan refinancing or debt consolidation, such as combining multiple high-interest business loans into a single, more manageable debt with better terms.

By refinancing high-interest loans or consolidating debts to lower interest rates, you can reduce your borrowing costs. Keep a watchful eye on the financial market to identify opportunities for cost savings in this area.

Actively managing your debt and seizing opportunities to reduce interest rates, you can effectively lower your financial burdens and enhance your business’s financial health.

Summary: your handy cost-cutting guide

  • Audit your expenses
  • Categorise expenses into essential and non-essential
  • Invest in cost-effective software and tools
  • Utilise cloud computing
  • Consider outsourcing non-core functions
  • Explore freelance platforms
  • Implement remote work policies
  • Leverage video conferencing and collaboration tools
  • Energy efficiency
  • Upgrade lighting and HVAC systems
  • Encourage energy-saving habits
  • Negotiate for better terms and discounts
  • Continually review vendor contracts
  • Invest in employee training
  • Cross-train employees
  • Focus on digital marketing
  • Analyse marketing ROI
  • Implement just-in-time inventory practices
  • Monitor and forecast demand
  • Refinancing and debt consolidation
  • Explore options to refinance high-interest loans
  • Keep an eye on the financial market


Small business owners can effectively cut costs by adopting these strategies without sacrificing the quality of their products or services. A balanced approach that targets the most significant cost drivers while maintaining operational efficiency is the key to long-term success in today’s market.

Remember, however, that cost-cutting should not compromise the quality of your products or services, and a balanced approach is key to long-term success.

Frequently Asked Questions
  • How can I begin trimming costs for my small business?
    Start by conducting a thorough expense audit, categorising expenditures into essential and non-essential areas to focus on.
  • What role does technology play in cost reduction for small businesses?
    Embracing cost-effective software and cloud computing can streamline operations and reduce manual labour, leading to significant savings.
  • How can I reduce employee-related costs while maintaining productivity?
    Consider cross-training employees to handle multiple roles, which enhances flexibility and reduces the need for additional hiring.
  • How can I make my marketing efforts more efficient and budget-friendly?
    Focus on digital marketing strategies like targeted social media advertising and email campaigns, and regularly analyse your marketing return on investment (ROI) to allocate resources effectively.
Written by:
Stephanie Lennox is the resident funding & finance expert at Startups: A successful startup founder in her own right, 2x bestselling author and business strategist, she covers everything from business grants and loans to venture capital and angel investing. With over 14 years of hands-on experience in the startup industry, Stephanie is passionate about how business owners can not only survive but thrive in the face of turbulent financial times and economic crises. With a background in media, publishing, finance and sales psychology, and an education at Oxford University, Stephanie has been featured on all things 'entrepreneur' in such prominent media outlets as The Bookseller, The Guardian, TimeOut, The Southbank Centre and ITV News, as well as several other national publications.

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