Ways to save money on overhead to sustain your business through the financial crisis
This has been a difficult year for businesses as we have all worked to manage through uncharted territory. Unfortunately, as expected, the fall has brought with it an increase in the number of confirmed COVID-19 infections and we do not yet have a proven vaccine that is available to the public. For businesses that have so far managed to remain operating, it may now be time to look for additional options to reduce overhead in order to stay open. The list below presents ideas that may help to sustain your business as we work to stop the spread of the virus.
Minimize Your Office: Many business owners are reevaluating their need for an office and questioning whether having an office is as important as it seemed prior to COVID-19. If you have been maintaining your existing space, now may be the time to do some deeper analysis to determine if it is providing the value needed to continue supporting the expense. Questions to ask yourself include:
- Do you need as much office as you currently have, or can you downsize your space?
- Can you eliminate expensive rent entirely?
- Can employees work remotely as well as they do in the office?
- If you have had team members working remotely, have you seen any changes in productivity that should factor into your evaluation of the value of your shared working space?
For many small business owners, having a professional, public office space is often a significant symbolic achievement and giving it up may not be easy. But since we can’t yet say how long it will be before things return to pre-pandemic norms, considering reducing this significant expense may be necessary.
Minimizing Space Means Minimizing Utilities: Keep in mind that reducing your physical footprint can also bring along other cost-savings. You can also cut expensive utilities and eliminate services that you no longer need, such as water deliveries, coffee services and parking fees.
Review Supplier Agreements: Working with trusted business partners for the long-term is often the simplest path to operating your business. You understand how each other’s organizations work and have developed processes and shortcuts that maximize your interactions. However, if faced with financial challenges, it may be time to start searching for alternative vendors to see if you can find a better deal. If you are able to locate similar goods or services at a better cost, before walking away from your existing business relationships, see if they will be willing to match the new quote you have received. For many suppliers, it is in their best interest to find a way to help you stay in operation and they will be willing to accept a drop in profitability in order to maintain your account.
Ending Leases: If you lease equipment or vehicles, you might be able to end those agreements, especially since those items are not currently being used while the office is not in use and travel is restricted.
End Subscriptions, Services and Software Expense: Not in the office anymore? Do you need to keep paying the cleaner or keep other expensive services? Do you need all the software licenses you are currently paying for? What about magazine and newspaper subscriptions, the office Netflix, or cable TV. While these may seem like small expenses, these together can add up to large cost-savings in the long run.
Deferment: For businesses that have so far managed to stay operating at a relatively normal capacity by dipping into cash reserves, it may be time to investigate some other options. While not ideal, for businesses that are finding themselves in a cash-strapped position, many landlords, credit card companies and more may be willing to defer payments to help soften the immediate blow of the COVID economic crisis.
Travel: While it may be obvious, the emphasis on remote/virtual work has also minimized the need for travel and travel-related expenses. Businesses should look at their budget and determine how they can reallocate this money, or let it move to the bottom line. Alternatively, businesses can use some of the money saved from not traveling to try and capture new leads and new business by testing creative, sales-focused events such as webinars, virtual conferences, and more.
Switch Up Marketing Tactics: Walking away from marketing expenses entirely can be a very short-sighted choice. But swapping out expensive advertising placements for lower costs digital and social promotions is something that should be considered. These approaches have the added benefit of giving you opportunities and options to increase personalization and traceability to help you see the effectiveness of your spending.
Review Payroll and Staffing: While never an easy subject, keeping the business open is the most important priority of a business owner. Before considering cutting employees, review options for less costly benefit options, switching employees to part-time status and reducing your hours of operation to make the time you are open as profitable as possible. Enlisting the aid of interns and contract employees are other options for businesses looking to cut labor costs without reducing their capacity to complete work.