Many small businesses are caught between a rock and a hard place currently as the cost of running a business has skyrocketed due to inflation, and now customers are cutting back on spending even more to survive the shift in the dipping economy.
Even though this situation may cause a lot of stress and concern, there are some things you can do immediately to help shave off some of the costs of your day-to-day operations.
1. Remove unnecessary expenses.
You could have subscriptions or services you are paying for that you could do without. Check your transaction history to see if there are any reoccurring payments that you can eliminate. You may also want to check your expenses weekly to find out where you can make improvements faster.
2. Renegotiate prices on areas you can’t cut out.
Service providers tend to raise their rates over time. Find out if there are any good deals being offered to new customers or if the service provider’s competition has a lower rate than yours. Then, contact customer support and try to negotiate a lower price. It will be worth the additional effort if you can reduce your monthly expenses in this area.
3. Consider changing your work environments.
COVID-19 may have put additional stress on many companies that had to shut down, but it also caused a shift in forcing many people to work remotely. Now, remote work is more common than ever and people have been trained on how to operate in a home work environment. Closing an office and going 100% remote would save you money on renting out a space. Even downsizing a large office to a smaller base of operations could save you thousands a month. You may be able to sublet space you don’t need if you have a current long-term lease.
4. Change product or service offerings.
Check your products or services that are not as profitable in other areas. Maybe there’s an item on your menu that no one really orders or you are stocking items that don’t move out the door. If you can eliminate products that aren’t selling or take away services that people aren’t as interested in, you can reduce expenses and focus on the areas that are bringing in more revenue. You could also have a sale to clear out inventory on those less profitable items to reap some of that cost back.
5. Use credit cards that have cash-back perks for everyday expenses.
Some credit cards have some amazing perks that will give you gift cards or cash back for spending. Determine which areas of your business can afford to be charged to a credit card and paid off in a timely fashion and then enjoy the benefits of receiving those extra dollars every month. Make sure you check on the annual fees and interest rates to avoid getting into a financial bind that will cause you to pay more for using the card than you planned.
6. Save energy.
While making your business energy efficient is a smart and important action to take regardless of the ever-changing economy, taking the time to ensure you aren’t wasting energy is a great idea when your daily usage REALLY matters. You can save up to 40% on energy costs just by changing your lighting.
Follow these tips:
–Use dimmers in every room so you can make the most of the daylight and reduce lighting during those key hours and then make them brighter in the evening.
–Use motion-activated sensors to atomically shut off lights when there is no one in the room.
–Switch traditional lightbulbs to LEDs.
–Use a smart thermostat that adjusts the temperature of the room throughout the day. Changing the thermostat by just a couple of degrees can make a big difference.
–If you can’t invest in some of these energy-saving solutions, you can always practice mindfulness and simply remember to turn everything off when not in use. Place reminders on your phone or share the responsibilities with other members of your team to ensure all your machines, lights, and other electronics are turned off outside of working hours.
7. Consider changing your phone system.
You may be able to save some cost on changing up your communication equipment. There are multiple options outside of paying for a traditional landline. Perhaps you discover that your company doesn’t really need phones, especially if staff work remotely and can communicate over email and chat platforms. There are also smartphone business plans available that may be less expensive than the upkeep of traditional phones.
8. Replace paper with electronic documents.
Most companies still print some documents and have not gone 100% electronic. Take a look at how much money you could save by reducing or completely eliminating paper in your business. You could save all documents on a secure cloud, send invoices over the computer, and rely more on digital communications. It may be a bit uncomfortable in the interim to make a drastic change like saying goodbye to paper completely, but every dollar counts when you have to find ways of slashing those expenses.
9. Reduce business travel.
You may prefer to meet with clients and other key people in your industry in person, but even a long drive for a meeting will cost you due to high gas prices. Replace business travel with zoom meetings or other online communications. Not only will you save money on travel, but you’ll also free up more time to invest in your business activities.
10. Adjust staffing and boost productivity.
You can save money by adjusting your team members, their benefits, and encouraging more productivity. We have an entire blog dedicated to this topic. You can read it here!
Real Stories From Businesses on How They Cut Back
Businesses are getting creative with where they can cut expenses or boost productivity among their current staff. Read some of these examples, and then do some digging yourself to discover where you can improve.
1-800-Flowers: This major flower company is cutting back on labor and transportation costs by investing in automation. It is also looking into ways to reduce delivery distances so that orders can qualify for next-day ground shipping, which is cheaper than next-day air shipping, CFO Bill Shea reported.
Coppell, a Texas-based Container Store: They revamped the way they unpack delivery trucks, freeing up more staff to increase productivity and reduce hours. Coppell also improved its phone system to revamp the quality of its customer service. At times, it may be wise to spend some money on certain areas of your business to make more profit in the long run. In this case, the new phone system helped bring in more orders by providing better, more reliable customer service.
Dine Brands: The Dine Brands company, which owns the Applebee’s and IHOP brands, put together a list of 140 ideas for cutting costs. Some of them included experimenting with robots to serve guests or operate deep fryers, installing energy-saving light bulbs, and taking orders with tablets.
PerkinElmer Inc.: This company makes scientific instruments and consolidated packages to reduce transportation costs.
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