There's never been a good reason to think that the current recession would be anything other than long and painful, and the economic news of recent weeks—as well as my own anecdotal observations—confirms that we're nowhere near out of the woods. I generally try to look on the bright side when it comes to the business outlook, but as one of my investors likes to remind me, hope is not a strategy. So I've been looking hard at every possible way to save money.

Payroll is the biggest expense for most businesses, and thus cutting back on staff is the most obvious way to cut expenses. Layoffs, though, are very painful, and a lot of small companies can't really reduce head count without losing the ability to produce their products and services.

But there are some other steps you can take to save on payroll costs, albeit not very pleasant ones. One possibility, which would have seemed crazy even a couple of years ago, is pay cuts. Obviously this isn't much fun for anyone, but the truth is that with the weak job market and general uncertainty about the economy, many people don't have a lot of options, and your employees might be more amenable to this kind of sacrifice than you would expect.

It's important that any pay cut start at the top, and, if possible, it should include everyone in the company. Making it a temporary measure will help ease the sting. And you should tie it to some kind of long-term incentive program, so that people will have an opportunity to share in the future upside that the pay cut helped make possible. (Stock options are one good way to do this, as are profit-sharing plans.) You might be surprised at how well people respond if it's clear that everyone is in the same boat, for better or for worse.

Another way to save on payroll is a temporary furlough. Consider closing the company for a week and giving everyone an unpaid vacation or simply having everyone take an extra week or two of (unpaid) summer vacation. This can be tricky because people are generally counting on their paychecks to pay their bills, and if they suddenly can't count on their paycheck, they could be out the door in a hurry. But again, if people understand the stakes and are given some upside to look forward to, it can be a feasible approach.

Some of the other items in your expense line might also be more negotiable than you think. Consider asking your landlord for a rent reduction, especially if you're on a month-to-month lease; it's unlikely that she has a lot of potential tenants waiting for your space. Telecom carriers will often match their competitors' prices, so it's worth calling around to see what's out there.