Thursday, October 16, 2008

Cutting Costs

The Wall Street Journal has an interesting article today on how small businesses are finding ways to cut costs given the economic downturn. The article highlights some ways to reduce expenditures without cutting employees or service to customers.

In general, the philosophy that small businesses (actually all firms) should take in an economic downturn is that, "There is no such thing as fixed costs." In other words, businesses have to focus on overhead costs when volume plummets in an economic downturn. They must scale those down; otherwise, the average costs per unit will skyrocket as volume falls. Some good categories to focus on are energy, supplies, rent, and leases.