Strategies for Profitability in 2024: Navigating Taxes, Inflation, and Global Challenges through Cost Optimization

2024 brings new taxes, tax increases, inflationary pressure, the decline of the eurozone and a tense geopolitical situation. The first step a company should take to overcome these challenges and remain profitable is to optimise its costs by at least 15 %. The most important costs to consider are utilities, fuel, logistics, insurance, fleet management and working capital.

“In any industry, a difficult year and a volatile environment is ahead. As a result, spending cuts of at least 15% may be needed, but much depends on each company’s industry and the customer segment each business is targeting. For example, in order not to pass on increased costs to the individual end-consumer and thus maintain growing sales volumes, companies in the FMCG sector would need to reduce spending by around 20-25%. What is certain is that 2024 will be the year of smart resource optimisation”, says Remus Hîrceagă, Country Manager of Expense Reduction Analysts (ERA) Romania.

Factories in the eurozone cut back significantly on production in December, with economic activity contracting for the 18th consecutive month, according to a recently published S&P report, indicating that the economy is almost certainly in recession.

2024 will undoubtedly be a year of big gains, but also of volatility and uncertainty. But only those entrepreneurs who understand how to adapt to the rules of the game will be in the winning camp.

Remus Hîrceagă adds that intelligence will be the word of the year in business, both in terms of implementing artificial intelligence-based technologies and setting ambitious but achievable goals for companies. In addition, the ability of company leaders to make quick decisions in favour of cost optimisation will make the difference in terms of success in an unprecedented competitive environment.

To be effective, cost optimisation – a multi-stage operation whose ultimate goal is to minimise costs and maximise profit – must be carried out by specialists to bring measurable value to a business. With the identification and elimination of sources of waste come various changes to existing business processes that take time. Thus, a cost optimisation process in a company can take from a few weeks to months or even years, depending on the economic context, the circumstances in which the business is operating and the specific objectives of the organisation.

“During each stage all sources of low profitability are identified and eliminated. Infrastructure and maintenance costs are also reduced, so the company saves multiple resources across multiple segments (energy, logistics, packaging, waste management, insurance, working capital, etc.), the effect being growth,” added Remus Hîrceagă.