Cutting across the board often costs more than it saves. How to sort costs into what customers value, what keeps you running and what's just habit, and where to start.
By Patrick Artese, Founder, Arthouse Advisory
The short answer: don't cut evenly. Sort every cost into three groups: what customers value and pay for, what keeps the business running, and what's there out of habit. Cut the habits first, make the running costs more efficient, and protect what customers value. Across-the-board cuts tend to damage the parts of the business that bring the money in.
Why across-the-board cuts backfire
"Everyone take 10% out" feels fair, but it treats a cost that wins customers the same as one nobody would miss. The quick saving can show up later as slower delivery, unhappy customers or people leaving.
Sort your costs into three groups
1. Value: what customers notice and pay for, such as quality, speed, expertise and service. Protect these.
2. Running: what keeps the lights on, such as rent, systems, insurance and admin. Make these more efficient: renegotiate, consolidate, simplify.
3. Habit: costs that exist because they always have, such as unused subscriptions, duplicate tools, reports nobody reads, and suppliers never re-quoted. Cut these first.
Where the easy wins usually are
- Suppliers you haven't re-quoted in a while. In a 2025 CommBank survey, 47% of small and medium businesses said supplier costs had risen (CommBank / YouGov, n=511, May 2025). Re-quoting regularly keeps your existing suppliers honest.
- Subscriptions and tools. List every recurring charge, and check who uses each one and how often.
- Rework and waste. Jobs done twice, rushed freight and stock written off. These are cost problems that look like operations problems.
Do it with the team
The people closest to the work usually know where the waste is. Ask them, and say clearly what you're protecting. It changes how the exercise feels.
Frequently asked questions
Where should a small business cut costs first?
Start with costs that exist out of habit: unused subscriptions, duplicate tools and suppliers that haven't been re-quoted. Then make running costs more efficient. Protect what customers value.
Is cutting staff the fastest way to reduce costs?
It can look fastest, but it often costs capacity, knowledge and service that bring revenue in. Look at habit costs, supplier terms and rework first. Any decision about staff needs proper HR and legal advice.
How often should I review business costs?
A light review every quarter, and a full re-quote of major suppliers at least once a year.
Where to go next
Read How to protect your margin when costs rise, or see how we look at costs and margins. Start with the free Self-check or talk to Patrick.
Source: CommBank, "SMEs resilient in the face of rising costs", 26 June 2025 (YouGov, n=511, fieldwork 23–27 May 2025).
About the author: Patrick Artese is the founder of Arthouse Advisory, a business adviser with 15+ years of experience across 10+ industries. Read Patrick's story
