Cut Costs (Not Your Own Throat)

Cost cutting is as common as spring showers when the economy goes south or your company starts missing plan. It's smart to get out in front—aggressively—in tight times. That said, you gotta know what to cut and what leave alone. What to cut?

Absolute waste. It's stuff like note paper and things like extra, unused phone minutes. Ask employees for their cost-cutting ideas. They know where the waste is buried better than you do.

Overly expensive purchases. Try to get three bids on practically everything you buy, especially large expenses—and even on small, ongoing expenses.

Employees. Grade your employees' performance and potential on a scale from A to F. Then book a candid talk with whomever you graded below a B, or with whomever isn't trending in that direction. Sensitively and firmly free up their futures. Consider salting their duties into other positions before opening the positions to hire.

The P&L statement. Go down your expenses line by line for other ideas. Utilities? Can you crank down the thermostat 5 degrees for savings?

But beware of cutting into bone. By that I mean, triple-check that cuts don't accidentally lower revenue or simply shift costs. Seriously ponder before cutting the following.

Marketing. The advertising and P.R. expense lines are favorite whipping boys when business is hurting. The problem is that down times are when you need your name out there more than ever. Otherwise revenue will fall further. Certainly, stay within industry guidelines (generally 4 to 5 percent of sales) and measure which efforts are effective (the web makes this easier than ever). Hard times also open up opportunities to negotiate harder since you have leverage over desperate media outlets.

Education. This is the lifeblood of your company, essentially no different from R&D. Less of this means more ineffective and uninspired employees. Do. Not. Cut.

Technology. Yep, hold these expenses to a specific ROI but be very careful with cuts. Reductions here generally mean you'll wind up needing more humans doing what the technology would've done. Further, you'll lose valuable reporting tools, essential for strategic thinking.

Bottom line: Cut, yes. But cut with care and understanding. That will help profits and get you pointed north again.