Fixed cost "creep" slowly strangles businesses.



Small increases compound over time, creating death by a thousand cuts that often goes unnoticed until cash flow problems emerge.

Smart cost reduction requires systematic analysis, not desperate slashing that damages operational capability.

The Assessment Framework:

Review quantity and selection of each fixed-cost item. Do you need that exact quantity? Could you save by ordering greater quantities less frequently?

Suppliers often provide volume discounts that reduce overall annual expenses without affecting quality or service delivery.

Pricing Vigilance:

Monitor fixed cost prices over time. Carefully examine invoices for gradual increases, additional fees, or service charges that weren't previously included.

Periodically checking alternative sources provides leverage for negotiating better terms with current providers.

Usage Analysis:

Assess how you're using or wasting each line item. For each purchase, ask: "Knowing what I know about price, delivery, quality, and usage, would I buy this again?"

If the answer is no, flag these items for immediate scrutiny and potential elimination.

The Three Critical Questions Test:

Every expense must help:

1. Obtain new customers
2. Retain current customers
3. Increase customer lifetime value

Expenses failing all three tests become prime candidates for reduction or elimination.

Strategic Categories:

Focus reduction efforts on the largest impact areas: rent, payroll, advertising, and insurance typically represent the highest percentages of fixed costs.

Vendor Consolidation:

Multiple suppliers for similar services often create inefficiencies. Consolidating purchases can generate volume discounts while simplifying management and reducing administrative overhead.

Contract Renegotiation:

Just because a contract was favorable initially doesn't make it optimal now. Constantly review leases, insurance policies, and service agreements to negotiate better terms.

Research market rates to establish benchmarks for negotiations. Understanding your leverage and being prepared to consider alternatives strengthens your position.

Effective business optimization eliminates waste while preserving essential capabilities that drive revenue growth.