Probably one of the hottest discussion topics in management meetings during this Covid-19 pandemic is cost cutting. Layoffs, salary and benefits cuts are no brainer. But in most of the cases that isn’t enough to survive. Most likely you already have in your pocket the list of cost analysis from your accounting manager and now come the hardest part of it; to decide which one to cut.

It is not as simple as sorting and ranking the highest costs and cut the highest cost contributors. Often you are facing a catch-22 situation which make it even harder to make decision, especially for start-ups. One thing that is different from past recessions with this time recession is the fact that most of your employees are working from home so you already negotiated with your landlord to reduce your office space which will give you significant fix cost reduction. Again, like termination of your employees, this is too is no brainer. You don’t need to be an MBA to make such a decision. Fortunately (or unfortunately) you don’t have to convince your marketing division to cut travel and entertainment in this time recession.

Common mistakes in dealing with recession in regards to cost reduction is the lack of long term effect analysis and your burning desire to see immediate significant reduction, with day to day pressures from your head quarter, regional office and your shareholders.

This article is not meant to give you a list of costs and expenses you should cut. Because every businesses, every companies, every organization are having their own unique conditions and circumstances. There is no such a simple mathematical formula for this, but this will give you an insight of what and how to do it in a strategical thinking.

So, you terminated your employees, you altered your office space, you are lucky to have not to debate your travel and entertainment cost with your marketing team. Now, what is left in your pocket to target?

1. Marketing and Advertising costs
2. Insurance costs
3. Legal advisory costs
4. IT services
5. Office relocation

Of course there are many more, depends on your business circumstances, but those things such as golf or executive clubs memberships, should be very straight forward.

Those above 5 areas are where the common mistakes are happening. Because every body is looking for significant immediate effect until they overlooked and/or underestimated the future. Leaders should never
overlooked the future in every decision they made. In fact it should be the most important element to consider. Of course certain reduction must be made. It is unavoidable. But “no one knows what the future holds”, should be seen from both sides: what might not be happened and what might be happened.

A strategical thinking should be put on the table, instead of looking for easy instantaneous reduction. You need to carefully consider your jettison strategies to not find yourself naked when the economy start bouncing back and you end up paying more than you should if you have had the right moves.