Cutting Costs in Business: Ask “Why?” Before You Ask “What?”

If you’ve read my book you know I’ve learned to be thrifty. It’s the TPE way, man. But it hasn’t been the popular way, until now. Thanks to the rip-roaring economy, everyone wants to find ways to save money. Penny pinching is downright sexy. (Okay, maybe that’s a stretch. You use what you’ve got, right?)

But while your instincts may be to slash-and-burn along with the rest of them, there is a better way to save money. Before you cut—or keep—anything, ask yourself why you need it. Not IF you need it, but WHY you THINK you need it.

Sometimes we take on expenses because it seems like standard operating procedure, not because it makes sense for our business. We need to re-define those standards for our own business based on what is really important.

For example, why do you think you need to lease an office space? Is it because your competitors have one? Or is it because you want to show it off to your brother-in-law who doubted you? Or is it because you can’t figure out what to do with all of your stuff?

Once you realize why you think you need an office you can find other ways to solve the problem. For example, if you have a lot of files or inventory to store, you could rent a storage space and then downsize your office or eliminate it altogether.

Or, if you rent office space primarily for your employees, set them free! No, don’t fire them, just give them the opportunity to work virtually. You can always meet (for free) using Skype or FreeConferenceCall.com, or in person at a coffee shop, restaurant, or hotel lobby.

Asking the “why” question opens up a whole host of cost-cutting opportunities. For example, asking, “Why do I think I need more staff?” will help you save big when it comes to hiring. People often hire more staff because they feel overworked, when the answer might be to simply streamline systems or eliminate tasks altogether.

Or, maybe you just need assistance with a specific project, or on a seasonal basis. Once you are clear about why you think you need new staff you can start thinking about other options, such as recruiting interns or working with a virtual assistant.

Bottom line, there are no “must have” or “must do” checklists for running a business. The first crucial step in cutting costs is to stop making assumptions about what you think you have to spend money on and get clear about what you really need. I don’t know about you but I’d rather run a lean, successful business than keep up with the Jones’s or play office.

So, what expenses have you cut or reduced because you realized you didn’t need them after all? (Come on, talk dirty to me!)

By Mike Michalowicz, Author of The Toilet Paper Entrepreneur