Increasingly, companies are encountering the need to reduce costs, both fixed and variable. This is a critical issue that can affect all types of businesses indiscriminately, from small to large. The most affected, however, are SMEs. The topic is sensitive and widespread: suffice it to say that we are talking about some 211,000 companies that contribute 41 percent of Italy’s entire turnover, as well as 33 percent of all employees in the private sector.
In any business, whether large, medium or small, costs directly affect profit: the latter is derived from the subtraction between turnover (profit) and costs incurred by companies. In this sense, therefore, the need to reduce expenses may emerge for several reasons: it may be an immediate response to a time of severe business crisis, but also a strategy to increase profits.
It must be kept in mind, however, that reducing costs is not necessarily synonymous with “cutting.” Every cost is intended for a potential resource, so “cutting” an expense is equivalent to giving up some resources, which may be of a different kind. For this reason, you should act with the utmost caution and shrewdness in such cases in order to protect your business, your employees and your corporate reputation.
It is not at all uncommon, as we shall see, to encounter heavy difficulties in deciding which costs to reduce. First of all, it should be emphasized that there are a number of areas that can be subject to cost reduction, and–as a result–a variety of resources and business processes can go through a decrease in action, depowering or even zeroing out.
Tipiche modalità per ridurre i costi: dai dipendenti al marketing
One of the ways typically implemented is to take direct action on employees, since personnel costs in Italy are large. The actions taken may correspond to layoffs or layoffs. The immediate return in purely financial terms in the short term is possible (although there is the expense of severance pay to bear, which can also be very high), but the disadvantages that can be determined in the medium and long term must be emphasized.
Sacrificing an employee who normally makes a contribution but is directly accountable for the company’s crisis is not exactly praiseworthy behavior from an ethical and professional point of view, but more importantly, it does not correspond to an appropriate managerial strategy, as the company may lose out in terms of effectiveness and reputation, increasing discontent and fear among other employees, thus creating a less than optimal environment and working conditions.
Other areas in which action can be taken depend directly on the type of enterprise in question. If the company produces tangible, tangible goods, one may consider using cheaper raw materials, but this involves a downgrade from the point of view of product quality.
Another solution often identified is to cut the budget for activities such as marketing and communication. This type of behavior is explained by the fact that entrepreneurs are aware of the importance of these strategies in terms of visibility (and they are initially endorsed investments, after all), but the immediate return in economic fact of such activities is not before their eyes. However, it should be specified that a well-organized business is able to calculate or estimate the profits generated as a result of communication activities, which-if organized and implemented effectively-play a key role in corporate profit.
Having listed some of the solutions typically adopted by entrepreneurs to reduce business costs, while also presenting their disadvantages, we can now turn to how these problems can be overcome and by what means, presenting another approach and giving some examples of this.
Il piano di gestione dei costi
The first step to be taken consists in a wide-ranging change of perspective: the ideal option, in fact, does not correspond to the indiscriminate and “blind” cutting of costs (cost cutting), but to careful reflections on the areas into which expenses are diverted, with the identification of strengths and weaknesses (cost management). In this sense, it is imperative not to act impulsively, but rather to adopt a plan for managing and reducing business costs, carefully dissecting and analyzing all the branches and specifics of one’s enterprise, along with the expenses that are routinely incurred.
The planning work is complex, but–compared to the previous approach–the prospects will be more beneficial in the long run. First of all, an accurate calculation of all expenses incurred with the various types is needed: fixed, variable, operating. Already after this step, it will be possible to identify areas where you spend more than necessary, or unnecessarily. Obviously, however, this is not a simple action, and in this regard there are professionals who support companies and employers in precisely this type of operation, with studies aimed at verifying the margins for improvement and ensuring that all business processes maintain their efficiency. Among them, Profitalia is an expert in strategies to better manage costs, through constant coaching services to companies aimed at ensuring both their success and sustainable growth.
The potential of Italian SMEs, on the other hand, exists but is largely untapped. According to the report “A microscope on small business” (May 2024) produced by a pool of experts from the McKinsey Global Institute, it was found that if the productivity of Italian SMEs were brought up to the same level as those of the productivity “champions” of other countries, it would result in a +6.4 percent increase in GDP. It is, therefore, a matter of finding the right strategy to optimize one’s resources.
Conclusioni
The need for corporate cost reduction is often hastily identified with drastic cuts in personnel or certain key processes, thus losing out in terms of resources and effectiveness. This may have a payoff in the immediate term, but in the medium and long term-if there is no thorough study behind it-the negative consequences can be devastating in terms of business efficiency and working conditions.
The best way is to optimize costs, with an effective cost management plan, so as to have more profitable prospects in the long run. By doing so, it will be possible to identify certain areas where there is blatant waste in economic terms, reducing costs in that area or deciding to redirect the budget to business aspects that are deemed more strategic, implementing a plan to implement processes that are improved for both the company and the employees.
