13. Trim Fat Without Cutting Vital Muscle

Cost savings that improve profit and the story you will sellProblem Statement

Many owners know they should tidy costs before exit although the idea of a full scale cost cutting drive makes them nervous. Done badly it burns out staff, annoys customers and leaves a business looking brittle just when buyers are checking for strength. Done well it can lift profit, sharpen focus and prove that the operation is lean without feeling starved. The challenge is finding savings without accidentally chopping into the very things that make the business valuable.

What An Owner Might Say

“We probably have some fat in the numbers although I do not want to turn this place into a skeleton just to impress a buyer.”

“Every advisor tells me to trim overheads before I sell. Last time I tried, everyone panicked, quality wobbled and I backed away.”

Why It Happens

Cost cutting carries emotional baggage. Owners have seen versions where travel gets banned, training is slashed, good people leave and the mood drops. No wonder you hesitate. You know buyers want tidy costs, yet you also know culture and service levels are part of what they are paying for.

Most SMEs also grow in layers. Systems are added when needed, subscriptions get signed up for, roles evolve, benefits creep in. Very few owners stop every year to ask whether the current cost base still matches the current strategy. Old decisions quietly harden into “how we do things round here”.

There is another twist. Many owners are closer to revenue than to overhead detail. You can quote gross margin off the top of your head although you may rely on the accountant to summarise the rest. If the P and L shows a reasonable bottom line, line by line costs do not always get much love. That is natural. It just means there is often untapped value sitting in the middle of the report.

What To Do About It

Treat cost work as a design exercise rather than a slash and burn. Start with a simple question. If a smart buyer took over tomorrow, which costs would they see as essential muscle, which as helpful padding, which as pure waste. This mindset helps you think like the next owner while staying fair to the people who built the business.

Map your costs into three broad buckets. Direct costs that sit close to the product or service. Overheads that support how you sell and deliver. Investment spend such as development, marketing programmes and leadership capability. Within each bucket highlight items that have grown faster than revenue or no longer match where the business makes its best money.

Then decide what you are optimising for. You might choose three priorities such as protecting customer experience, keeping key staff supported and lifting sustainable profit. Use these as filters. If a proposed saving undermines one of those deeply, look again. If it trims comfort that no one will miss in six months, move it higher up the action list.

Start with the quiet wins. Old software licences, unused phone lines, duplicated tools, insurance settings, freight arrangements, bank fees, outsized printing or storage spend. Often these items have no champion. Removing them does not hit morale yet can add tidy sums to annual profit. The key is to lock the changes into process so the fat does not creep straight back.

Next, look at how work flows rather than just what it costs. Many labour savings come from fixing clunky processes, poor handovers, double entry or rework rather than from pushing people harder. Ask teams where time gets wasted or where customers experience annoying delays. Solve those problems and you lift both margin and story. Buyers love evidence that you have done that thinking.

Be very careful with anything that touches customer trust or staff safety. Cheapening materials, cutting corners on quality, ignoring maintenance or squeezing rosters until people are running on fumes may pump short term profit although it also leaves landmines for any new owner. In my view those are not savings. They are future problems with a bow on top.

How To Keep The Momentum

Cost work should run in short, focused bursts, not as an endless anxiety project. Set a defined review window, perhaps three months, where you and a small group go through one cost area at a time. Capture decisions in writing with a clear owner and timeframe. Then switch back to normal rhythm while the changes bed in.

Bring at least one trusted staff member into the conversation. People at the coalface usually know where waste hides. Involving them signals that this is about smarter business, not random cuts. Emphasise that you are trying to build a stronger platform for everyone, including whoever takes the reins after you exit.

Track the effect so it feels real. Show yourself and your leadership team the change in monthly overheads, not just a list of things you meant to cancel. Watching profit lift without breaking anything important is motivating. Those numbers also become part of your buyer story. You can show that recent gains come from structural improvements, not from starving the business ahead of sale.

As you get closer to market, shift from one off cuts to discipline. Make it clear that discounts need reasons, new subscriptions need approvals, pet projects need simple business cases. Buyers look for habits, not heroics. A steady pattern of sensible decisions is worth more than one impressive clean up followed by a quiet slide back into old behaviour.

Golden Nugget

“Good cost cutting feels almost boring a year later. The business runs smoother, profit is higher and no one misses what you removed.”

How RegenerationHQ can help

RegenerationHQ works with owners who want leaner numbers without leaving a hollowed out business behind. We start by listening to how your operation really runs, then frame cost work inside your exit strategy rather than in isolation. That means spotting where savings will genuinely lift valuation and where cutting would only store up trouble.

Together we build a simple cost map, highlight the few levers with the greatest impact and design changes that staff and customers can live with. That might include rethinking how work is organised, cleaning up old spending habits, reshaping supplier arrangements or clarifying which activities truly drive value.

We also help you turn those improvements into a credible story for buyers. Clean reports, clear explanations and a visible link between decisions and better profit all signal that this is a business run by adults who understand stewardship. The result is a leaner, healthier operation that feels good to work in now and looks far more attractive when it is time to sell.

If you want a steady guide beside you while you get ready for one of the biggest decisions of your working life, RegenerationHQ is ready to help you walk that road with clarity and confidence.