Lean times call for savings – not skimping

Operating a business during a recession isn't easy: you'll face many tough decisions about where to spend and where to save. But no matter how bleak things look, you have to recognize the difference between legitimate savings and skimping — cutting programs or expenses in ways that will come back to hurt your business in the long run.

Savings: Cutting back on employee travel
Skimping: Prohibiting all travel without exception

For many businesses, travel is an easy expense target to go after. And in the age of web conferencing and telephone conferencing, many types of meetings can be held just as effectively with remote participants.

The trick here is determining which types of travel represent worthwhile opportunities for your business. For example, if sales at a trade show are likely to cover your travel expenses, it simply doesn't make sense to miss it. Look for savings by downgrading your hotel choice, cutting back on giveaways, and being flexible on flights — but don't skip it altogether.

Savings: Eliminating expensive marketing programs
Skimping: Eliminating targeted marketing programs with proven ROI

When times are good, marketing budgets are often expanded to conduct wide-net branding or awareness campaigns. Obviously, now is not that time. If you can't measure the success of a given marketing channel, drop it. Look for programs that deliver customers directly.

Also, consider tailoring your messages to the times, if you haven't already. Coupons, price reductions, and other money-saving offers hold more power now than ever.

Savings: Reducing employee perks
Skimping: Eliminating core benefits

Employee benefits are another tempting target for cost reductions, but tread carefully. While employees may be unlikely to jump ship right now, heavy-handed pruning of benefits could propel them out the door once the economy picks up again.

Instead, look for ways to cut expenses without eliminating benefits entirely. For example, a small increase in employees' contribution to health insurance expenses, or a reduction in employer matching for your 401k. While these moves won't be popular, if you're honest with your employees about the need for cost reductions and present them as temporary measures only, they can provide significant savings without long-term hard feelings.

Don't be afraid to enlist your employees in this effort: ask them to rank which of your current benefits are most important to them, and use that info in your decision-making process.

Finally, try not to make petty decisions in this area: providing coffee or snacks, for example, is a minor expense when you consider the goodwill it creates.

Savings: Not buying new equipment or vehicles
Skimping: Running existing equipment into the ground

Knowing when to repair and when to replace essential business equipment can be a real challenge, but it's one that cash-strapped companies must face. From office basics like copiers to industrial equipment like forklifts, how do you know when to buy new equipment and when to invest in maintenance?

One key consideration is how much your business depends on the equipment. A warehouse that will take productivity hits every time a forklift is down for repairs shouldn't push a lift too far past its expected lifetime. On the other hand, if the equipment is only used sporadically, your tolerance for less-than-perfect operating conditions should be that much higher.

Another important point is familiar to anyone who's dealt with an aging car: maintenance costs for older equipment. While laying down the cash for a replacement can be tough, paying ongoing repair bills can quickly get expensive, too. It may be worth paying a mechanic or technician for a thorough evaluation of older equipment to get a sense of how long it's likely to last before you invest much in repairs.

How do you strike a balance between saving money and skimping? Let us know in the comments below.

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