As you continue to navigate through the COVID-19 pandemic and changes to your business, cost-cutting has likely been one strategy you’ve already implemented. It’s important to stay in front of customers during these challenging times, so it’s important to find a balance between cutting costs and maintaining your presence in the market. Here are 5 tips for managing this.
1) Defer Bills Where It Makes Sense
Many financial institutions and utility companies are currently offering bill deferment for impacted businesses. You might reach out to them to see if you qualify. Here are some examples.
- Loan Payments: Contact credit unions and other lenders to see if they are willing to suspend payments. Some are offering up to 12-month deferments for auto loans, mortgages and more. Be sure to ask questions to ensure you understand key information such as the deferment period, interest rates, amended loan agreements, and repayment due dates/amounts.
- Rent: If you lease your office, storage, or manufacturing space, you might consider reaching out to your property manager about deferring or reducing your rates as you work to get back to business.
- Credit Cards: Consider contacting your business credit card companies and asking them to suspend your payments or get rid of interest for a period of time. They may have programs in place, or you can negotiate your own program.
- Utilities: Many utilities are not conducting disconnects or charging late fees. This may be a good time to discuss pushing back or reducing your payments.
- Vendors: Have you reached out to your vendors to discuss new payment terms, better pricing, or other arrangements that could help both of you in the long run?
2) Get Rid of Unnecessary Spending
This is a no-brainer, right? Maybe not. This is a great time to look at your spending and make cuts anywhere you can. This includes anything that’s not essential to business and may even include operations efforts. Here are some ideas:
- Equipment you lease: If you have equipment that isn’t being used, you may be able to negotiate reduced lease payments. You may even have an opportunity to return equipment that won’t be needed for some time.
- Business Travel: While social distancing has reduced travel, there are still some people traveling for business. It may be time to look at remote meeting options, which will help keep employees safe and reduce expenses.
- The Office: This may be the time to evaluate your office and real estate footprint. If your space is larger than you need, or you find you can accomplish the same work with employees working remotely, you can look at a smaller space. You can also work to negotiate more favorable lease terms during this time.
- The Cloud & Software: Consider taking a look at your software licenses and usage. You could be in a position to reduce the number of licenses you’re covering. Maybe moving to a cloud-based platform or service could be beneficial to your customers, employees, and bottom line.
- Capital Expenditures: This likely isn’t the best time to proceed with capital improvements. Take this opportunity to talk with contractors and look for ways to reduce expenses on planned projects.
- Energy Usage: Is your business as energy efficient as it could be? Making changes like LED lighting and smart thermostats could save money. You can also consider turning off lights and reducing the temperature in your office.
- Consultants: You may be eager to hire a consultant to help you look for ways to sustain your business during difficult times. However, there are several business resources at your disposal that offer free consulting services. The Small Business Administration (SBA) provides business counseling at no charge, and the Service Core for Retired Executives (SCORE) provides mentorship at no cost to you.
3) Payroll Expenses
Oftentimes, payroll is a company’s largest expense, and unfortunately, sometimes you’re forced to let go of employees in order to save the business. Some companies are in a position to save positions if they make cuts in other areas. Regardless of the path forward, it’s important to support employees as much as you can. Consider these options.
- Reduced Hours: When possible, cutting back on days and/or hours can be a good way to reduce expenses while still providing paychecks to employees. This can also potentially avoid the loss of talent within the organization.
- Work Remotely: When it’s possible for employees to work from home, you’ll save on office costs such as electricity and other utilities. You can also continue to take care of customers.
- Extra Benefits: If you offer added benefits such as gym memberships and daycare, you can consider suspending those benefits during challenging times. Paying out bonuses or allowing overtime can be suspended as well.
- Layoffs and Reducing Staff: Unfortunately, it’s possible you may not be able to continue employing everyone on your staff. You may need to lay off non-essential workers or even terminate some employees. It’s important to handle these situations professionally, and you can direct affected team members to unemployment and other financial resources.
4) Less Expensive Options
The old adage “You have to spend money to make money” doesn’t necessarily apply to challenging times. You may consider doing a review of your vendors to look for cost-saving opportunities. Here are some ideas.
- Online Selling: Now may be the right time to ensure you’re able to do business online. Give customers who prefer to stay home the option to continue patronizing your business with digital options. This can also reduce costs while bringing in revenue.
- Services: From landscaping to email services, now’s the time to review your options and look at competing products and services. You may find you can get more for your money by making a change.
- Software Alternatives: There are so many open source software options available now, and it could be helpful to do some research. For instance, many Microsoft Office users find they can seamlessly switch to Google Docs or Open Office. Wave is a free alternative to QuickBooks, and there are even alternatives for creative software such as Photoshop.
- Equipment: If you’re in need of new equipment, consider looking at used or refurbished options to save some money. You can also save on items such as office supplies by comparing pricing online and shopping at local dollar stores.
5) Affordable Marketing
While you are likely to cut back on marketing expenses during difficult times, that doesn’t mean you should stop marketing altogether. Instead, look for new, affordable ways to stay in front of customers in order to maintain your presence. We’ve put together some options for you to consider.
- Priorities: You’ve likely already reviewed your current marketing strategies and plan. Look for the things that have been working and do more. If you have had a campaign or effort that didn’t perform, you should cut it.
- Public Relations: Offer to serve as an expert source for journalists and other members of the media who might be looking to gain some insight into how the pandemic is affecting your industry and/or city. Provide articles for business newsletters and other publications. You can even create free resources for local businesses to help build credibility and stay in front of your audience.
- Increase Low-Cost Marketing: Email and social media marketing are both low-cost/no cost options for reaching out to customers. The key point to keep in mind is to provide useful content that will resonate with the audience in hopes they like and share it.
- Seek Out Business Partnerships: Work with non-competing businesses to market together and spend less than if you advertised on your own. One idea would be to do an Every Door Direct Mail postcard to the homes and/or businesses in your area and share the cost.
- Join in the Conversation: Join social pages and other online communities and provide helpful information and/or advice. Maintain your presence by becoming a valuable resource. And, if the community has a general issue, you can all work together to find a solution. This creates a feeling of solidarity and can ultimately lead to new business.
- Donate and Volunteer: Some companies have the ability to donate funds, goods, or services to help with COVID-19 relief efforts. If you’re not in a position to do this, you and your employees can also volunteer. While this should not be done solely for marketing purposes, it’s likely you will get some visibility.
- Online Sessions: Think about offering online seminars, classes, or workshops to provide valuable, entertaining, and helpful information to customers and prospective customers. This is a great way to stay in front of customers when you can’t meet in person.
Reducing or eliminating expenses is necessary during times of crisis, but how much is too much? You’ll need to balance your current needs with your future plans. If you cut too much, you could risk losing valuable market share. Cash flow projections are really helpful in understanding how much you need to stay afloat as well as how much you might be able to cut. Forecasting revenues for 3, 6, and 12 months and planning for a variety of scenarios are the best ways to be prepared.
You can refer to those cash flow projections when making decisions about reducing expenses. This will help you make choices that will put your business in the best position to be successful after the pandemic and to be prepared for the next challenge.
The information provided in this blog does not, and is not intended to, constitute legal or financial advice.