A Guide to Using Cost Reduction to Increase Profits

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Every business owner wants to reduce the costs that their company is incurring. But are there any ways to reduce costs while simultaneously boosting profits even further?

It’s possible to cut costs without it resulting in a commensurate loss in your profits. Here’s what you need to keep in mind.


I’m sure you’ve heard of the cloud by now. In some sense, “the cloud” is basically another term “the Internet”. Bringing your business to the cloud basically means you’re introducing the use of online platforms to do a lot of your business. There are a lot of cloud services, like Google Drive, that allow you to do business on them for free.

The ways in which this can save money is sometimes obvious. It reduces the need to have local servers for data storage at your end, which will save you a lot of money. But it can also increase profits by making everything much easier to handle. Productivity is increased – which means company output is increased.


Some business owners are under the impression that only big companies with millions to throw around get into outsourcing. But outsourcing is actually very popular among businesses who need to save money. The resources that an outsourcing company has access to would cost you so much more if you were to get them yourself.

Depending on what sort of work you do, outsourcing can actually cost a lot less in the long run. Let’s say, for example, that you’re in the insurance business. By using something like insurance BPO, you can free up valuable resources. You ensure quality at a price that is lower than the cost of the software and employee investment you’d need otherwise.

Production costs

Of course, one of the best ways to increase profits is to ensure that as many people as possible are buying your product. I know – easier said than done, right? But a lot of companies make the mistake of throwing more money at the product in order to increase profits. This can work some of the time, of course. By increasing investment, you can increase the quality of the product. You can also spread the word more by increasing marketing expenditure.

But the best way to get people to buy your product is to make it affordable. And to be able to offer it at a lower price, you need to cut those production costs. You have to be very careful here – it’s estimated that 80% of production costs are set in the first 20% of production activities. Plan early!

Don’t forget the importance of quality

Cutting costs is always going to be a strong priority for any business. But some business owners make the mistake of putting cost reduction as a higher priority than quality assurance. And this is not a mistake you can afford to make. Especially if you’re a startup, you need products and services of a high quality to ensure that you get the word-of-mouth you need.

So whatever cost reduction you’re engaging in, don’t let it affect the quality of your product in any substantial way.