For lots of businesses the production and profitability of the business has been somewhat disrupted. It can be extremely to slash your expenses across the line. However, cutting too many costs all at once could actually cause more harm than good. It could leave your business very vulnerable if too many costs are cut.
There are some ways that you can control your business costs strategically to reduce your expenses, but not become vulnerable. In this blog post we have put together some cost reduction measures for your business, to help you survive these uncertain times.
Review and Revise
Take the time to review and revise the short-term and long-term budgets. By doing this you are able to gain a clear view of where the business is at financially. Then you can start reviewing your overall budgets for variable spend and see where revisions can be made.
Now is a good time to run break-even analysis on multiple data for different parts of the business. Take the time to develop a financial forecast that will show you the best and worst outcomes for the business. Look at where you can adjust your budgets and check for anticipated expenses. Try and develop at least one post-recovery plan for your business so you are ready and prepared to hit the ground running when ‘normality’ returns.
Focus On Cash Flow
Reliable cash flow is essential to maintaining the operations of your business, especially when the economy takes a turn for the worst. Many small business owners may not have access to more robust sources of credit or extended terms with creditors. This is why focusing on cash flow is even more important for small business owners.
Take the time to review the payroll and personnel expenditures; is there any movement for change here? Are there employees that can be made part-time instead of full-time, just for the short-term? Consider ways to create a work from home program for employees. This will help reduce utility bills at the office and will save in other areas too. It may be worth considering curtailing all hiring until the crisis is resolved.
Many businesses in this position will also delay or cancel non-essential projects or contracts with freelancers until the business is in a better position financially. Have a look through your existing service contracts and subscriptions. Are they all needed, and could some be cancelled or placed on pause? It’s a great idea to be absolutely transparent with your vendors and build good supplier relationships to be able to ensure you have their support during these tough times. Now may be the time to choose new vendors and suppliers that are able to help you, if current suppliers can’t?
Move The Rocks
Lots of business owners had big plans before coronavirus hit. These included the purchase of large and expensive equipment, new facilities, office upgrades and more. Is there a way that these big-ticket items could be moved to the next quarter, postponed until next year or even cancelled until there is more certainty and stability?