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How To Cut Costs Without Laying Off Employees In Your Start-Up

Updated: Apr 27



Making sure your business or start-up runs well is a hard thing to do. It requires a lot of work and effort. There are times where your sales and profit margins are not in line. This causes your start-up to go into loss. At the same time expenses keep increasing. Hence most business owners resort to laying off their employees to save money and cut costs. The question that should be asked here is why aren’t employers trying to find other ways to cut costs? As a business owner, it’s important to respect your employees and it should be your prerogative to find creative alternatives to layoffs.

Over the last year, the way we conduct business has changed. Many industries have been drastically impacted, layoffs are at an all-time high, business is closing, etc. In this situation, layoffs look very appealing because it is the easiest way to cut costs. However, there are many ways to cut costs without laying off employees. As a start-up consultant in Mumbai here are some of the ways I know and have implemented to cut costs without laying off employees.




Hiring Freeze


The easiest and most economical way to save money in a start-up is by implementing a hiring freeze for any non-essential position. Being a start-up consultant in Mumbai I am the first to affirm to my clients to carry out this method of saving money. This method can be carried out by dividing the extra work equally among all the employees.

Labour as a whole is expensive. By conducting a hiring freeze, the biggest drain on your capital is stopped. This helps in reducing costs drastically. It’s important to remover that it costs less to retain employees than to replace them.




Cut Salaries


To avoid laying off employees, another strategy that can be implemented is cutting the salaries of the current employees. This will not please your employees in any way. However, this is a better method to cut costs instead of resorting to more drastic measures. Explain to your employees the need for the salary cut. Conduct the cut in such a way that it does not make a very big dent in your employees’ day to day living at the same time giving you the financial stability you need.




Working From Home


As seen throughout this pandemic, a majority of businesses have been forced to close their offices and work from home. This has undoubtedly caused a lot of problems. However, work from home has saved employers a lot of money. There has been a drastic reduction in electricity, water and other utility bills that would one take a big chunk of income. Making employees work from home allows you to cut costs and use the money for more immediate things that are important to sustain your business.

A Business plan consultant can help business owners implement the changes in the business plan to support this type of business model. As such it can become a more stable and legit plan.




To Sum Up


Cutting costs is always a hard thing to do, however, some tough decisions must be made. The most important thing is keeping your business alive and taking the necessary steps now will save you from further problems later. Sometimes, however, once you’ve exhausted every avenue, layoffs are necessary. In those cases, you must follow through and do the needful.




About Devansh Lakhani


Director of Lakhani Financial Services, and a Chartered Accountant, he helps in start-ups funding India from his network of investors. He guides and advises start-ups to scale up by providing efficient sales, marketing, team building, and business management strategies. Being a business plan consultant he has executed fundraising by block deals on the stock exchange and conducted IPOs and right issues on the SME platform to the tune of over Rs. 50 Crore. He is currently working with start-ups from various sectors to help them channelize their business models and investments.


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