Master cost optimization in uncertain times

ARTICLE | March 04, 2024

Authored by RSM US LLP

In current market conditions, middle market companies must navigate the tightrope between sustainable growth and financial health. Cost optimization—not simply cost-cutting but a true strategic evaluation of costs that leads to meaningful changes to the cost structure model—is a critical strategy that enhances a company’s strategy and competitive advantage without compromising quality or innovation.

As a result, more business leaders are looking to optimize their cost structure to increase adaptability and build sustained growth. This checklist is a jargon-free compass for your cost optimization journey—it offers eight practical and powerful steps tailored to the unique challenges and opportunities faced by middle market companies.

Built from the insights of industry experts, each item in this checklist is a distilled action point that focuses on key areas, from technological upgrades to organizational restructuring. Whether you're a finance, operations or technology executive, these eight steps provide a clear road map to help you transform your company's cost structure, driving efficiency and fostering long-term, scalable success.

1. Develop a financial model.

• Create a detailed model to identify potential savings from optimization initiatives.
• Identify opportunities based on an analysis of competitors.
• Incorporate different scenarios to understand the financial impact of various optimization strategies.

2. Evaluate current technologies and processes.

• Conduct an in-depth analysis of existing technologies and processes.
• Assess the alignment of current technologies with business goals and efficiency metrics.
• Identify areas ripe for improvement, automation or updating.

3. Identify cost-saving levers.

• Thoroughly pinpoint inefficiencies in current operations.
• Identify key areas that offer significant optimization opportunities.
• Focus on strategic changes that can transform both finance and operational processes.

4. Execute cost savings initiatives.

• Rank initiatives based on impact potential and ease of implementation.
• Develop a phased approach for executing these initiatives.
• Set clear timelines for the expected realization of these savings.

5. Streamline organizational structure.

• Analyze and redefine roles and responsibilities for efficiency.
• Focus on reducing redundancies and enhancing communication.
• Align organizational structure with strategic business objectives.

6. Consolidate technology and systems.

• Assess and integrate existing technology platforms for better synergy.
• Implement or upgrade to systems that meet specific business needs more effectively.
• Aim for reduced complexity and increased efficiency in technological infrastructure.

7. Monitor and adjust the plan as needed to stay on the established timeline.

• Establish a solid but flexible program management and governance structure.
• Identify and implement tools and methods to monitor, measure and track progress for accountability purposes for executing against the timeline.

8. Manage business spend efficiently.

• Implement strategies for smarter, more efficient expenditure management.
• Regularly review and adjust spending to align with business objectives.
• Explore new methods or tools for spend tracking and control.

Takeaway

These eight steps ignite strategic thinking, drive meaningful structural change and are a gateway to understanding and mastering the art of sustainable growth through cost optimization.

The time is now to start looking at costs in a new way.