There are several common ways to lower your bike, from cheap to expensive. All have their advantages and issues. The best overall results usually come from combining a couple of these methods. Warning: When you lower the bike, your frame and foot pegs go down. Do only as much as you have to, you will bash your skid plate and kick bad stuff that others will clear.
First, cut your seat. You can easily do this yourself, it's much easier than you think, costs you nothing but some new staples. Take out 1" to 1 1/2" and you'll really feel the difference, in height and comfort Use an electric carving knife, you’ll get a much better finished product. ( If you don’t have one, they’re only $15 ) Use a foam sanding block to get a smooth finished edge. Staple your original cover back on and you’re done. One problem is that when sitting you've just raised your bars, and tightened up your knee bend. Some people don't like that, some feel better sitting lower into the bike.
Next is a lowering link. I've used a Kouba Link on a couple of my bikes, there are several other manufacturers of lowering links out there. They are very easy to install and usually don’t cost too much. For my DR-Z they’re $80, for my Honda CRF they’re $140. They are available in different lengths, but the more you drop the seat the more it affects your suspension travel. Here’s a quote from the Kouba site FAQ’s: “They put more leverage on the rear spring and make the rear more compliant on the small stuff but may require a heavier rear spring to help prevent bottoming if a rider is very aggressive.” I think the model that drops your seat about 1" is the best, much more than that and the suspension tuning and steering problems can start to arise. If you’re not a real aggressive rider, lowering links are great.
You can take your suspension to a specialist shop and they will put spacers inside the forks and shock. These will restrict the overall length of your shocks, lowering your whole bike by reducing the amount of travel you have available. This service will require new fork springs, and can include custom tuning the suspension for how you ride. Cost runs from $400 to $800, and you lose some travel. But if you’re a trail rider with a harsh MX suspension, now's the time to take care of both issues.
A different rear tire can lower your seat. The popular Dunlop D756 110/100x18 is a relatively tall tire. A Michelin AC10 110/100x18 has a 3/4” smaller diameter, that’s a 3/8” lower seat height. A Dunlop D739 100/100x18 is 1” smaller, giving a 1/2” lowering. Yes, that D739 is a little narrower, but it’s really quick turning in tight stuff.
Some riders choose to cut their sub-frame. You cut out a small (+/-1/4”) piece of the diagonal strut of the sub-frame and weld it back together. Be Careful, too much and you will bottom your tire into your fender before you use full travel. To me, the bike then feels like a chopper.
If you decide to go with a lowering link or shortened suspension, and you go 1 1/4” or more, your kick stand will be a little too long. Not unusable, but enough that your bike might tip over if you aren’t real careful.
Try to resist the temptation to lower the bike until you get both feet flat on the ground. You’ll have lost some important ground clearance and ride quality. If you can get your toes to touch on both sides, you’re doing better than Ricky Carmichael. And how often can any of us say that?