Many businesses are struggling financially due to the COVID-19 pandemic. According to a recent survey, 51 percent of small businesses have seen a large negative impact from the crisis. Nearly a third expect that it will take more than six months for their businesses to resume normal operations.
Since hopes for a quick recovery have been shattered, lots of companies have reduced employees’ hours or laid off workers. Others are struggling to remain open amid a sharp decline in sales.
We’re still in the midst of a second wave, but savvy businesses can survive by aggressively slashing expenses. Here are 10 ways to cut costs during these tough financial times:
1. Reconsider your purchasing strategy.
Group purchasing is one way to cut expenses without sacrificing quality. A group purchasing organization works by leveraging the buying power of its members to get bulk pricing from suppliers. Member businesses can save as much as 22 percent on things like office supplies, ride sharing, and travel.
2. Renegotiate with suppliers.
If your hard costs have gotten out of hand, take the time to review your supplier agreements. You might be able to find lower prices elsewhere or save money with your current vendor. It never hurts to renegotiate!
Sometimes you’ll learn that your company has been purchasing the same items from multiple suppliers. Placing larger orders with one vendor can lead to better discounts. You might also be able to get better pricing by placing orders less frequently. If all else fails, just ask for a discount. Your supplier might offer one to keep your business.
3. Cut discretionary spending.
Employee perks might get talent in the door, but they won’t help keep employees on your payroll. See how much fat you can trim by doing away with employee events, catered lunches, fitness stipends, and tuition reimbursement.
If you’re worried about disappointing employees, try shifting toward low- or no-cost perks. Host a monthly potluck instead of a catered lunch. Invite a fitness trainer in for weekly classes instead of paying for gym memberships. Invite employees out for happy hour rather than throwing a party.
4. Eliminate sneaky monthly expenses.
If you’ve already reduced discretionary spending, look to eliminate recurring expenses — even if they seem small. Stocking the break-room fridge with bottled water or ordering food for meetings is nice, but it isn’t essential.
One area where expenses add up quickly are software subscriptions and cloud storage for files you no longer need. New technology is emerging all the time. You may be able to find free or lower-cost versions of the software you’re using.
5. Review your insurance policies.
Sit down with your insurance agent to see how you can reduce the cost of your coverage. You might be eligible for discounts you weren’t aware of or be paying for more coverage than you need.
6. Streamline your processes.
Time is money. If you’re paying humans to complete lots of repetitive tasks, you could be throwing thousands of dollars out the window. This doesn’t mean you need to cut jobs, but it does mean that your employees’ time could be better spent.
Ask your staff to do an audit of their weekly tasks — especially “busywork” that could be automated. Pay special attention to work that passes through multiple hands and tasks that require lots of paperwork or spreadsheets. Employee onboarding, payroll, bookkeeping, and customer support are all areas that can be streamlined with technology.
7. Retrain and restructure.
If you need to hire for new positions but can’t afford it, consider cross-training your employees and restructuring their roles. For instance, you might have two employees who aren’t working at full capacity.
By shifting the workload around, you could free up hours for an existing employee to take on new responsibilities. Your staff will likely enjoy the chance to learn something new and tap into unused talents.
8. Relocate, renegotiate, or reconsider your lease.
If you lease an office space or store front, your monthly rent is a huge expense. While relocating can hurt a restaurant or retail store, it’s less of a problem for businesses that just need to move their employees’ work space. You might be able to find a cheaper space in another part of town or by downsizing.
If relocating isn’t an option, try renegotiating your lease. Long-term lease agreements tend to be cheaper than short-term ones, and your landlord might be willing to negotiate if you’ve been a good tenant.
Finally, you could consider shutting down your office altogether. COVID-19 has forced a shift toward remote work, and 73 percent of executives say it was a success. Think about moving to a 100-percent remote workforce or utilizing a co-working space a few times a week.
9. Take a pay cut.
Voluntarily cutting your own pay doesn’t just help reduce your expenses. It also sends a message to your employees that you have skin in the game. If you take the first financial hit, your workers will resent you less if you’re forced to make cuts down the road.
10. Reduce your workforce.
Laying off employees is one of the hardest things for any leader, but sometimes it’s necessary to stay afloat. Payroll is usually a company’s biggest expense. Laying off a few workers today could mean that the rest of your staff will keep their jobs tomorrow.
Operating with a reduced staff means you need your most efficient and essential workers. If you must cut jobs, make sure you lay people off based on their roles and performance — not personal need. No one wants to fire a single parent with three kids, but your first priority must be saving the business.
There’s never been a more challenging time to lead than in the midst of a pandemic. The business landscape has changed dramatically, and we have no way to know how long these changes will last. Cutting costs may be the only way to ensure your company’s survival. But if you can weather the storm, you’ll emerge from the COVID-19 crisis a leaner, smarter, and healthier business.