Reduce Business Costs 7 Ways To Reduce Spending
Even before declaring a nationwide lockdown, the COVID-19 pandemic has dramatically affected the business industry and the economy. Not to mention the knock-on effect of recessions and increased inflation.
Running a business has become more challenging over the last few years and managing cash is more important than ever. In doing that businesses need to make sure they are not any unnecessary spending.
Here are smart ways to reduce spending and cut your business costs.
Find your money leaks
Money leaks are when money is spent in a business that is neither
100% necessary to keep the proverbial lights on; or
delivery a positive return in terms of money or time
I go through the exercise to identify money leaks in the video below
Reduce your fixed and variable expenses
Are there any fixed or variable expenses that you can reduce? Can you negotiate with your suppliers/service providers?
Speaking to your landlord, or Facebook ads agency, even when in contract, sometimes suppliers will be willing to negotiate rather than lose your business (as they might be struggling and would rather have you as a customer/client, rather than losing you altogether). Or perhaps you can negotiate more value for the same price?
Delay capital expenditures
If you were planning to expand your business or add new equipment, postponing it for a short while may do your business some good.
During a pandemic or recession, money can become tight, and the market is unpredictable. Instead of making large expenditures, you may need to be cautious for now, and save your pennies.
There is the right time for capital spending, and it is not necessarily now.
Adapt to the current market
When markets change, through recessions, pandemics or for other external reasons, businesses may need to adjust to keep up.
That means reviewing your strategy. Looking at the services and products you offer, and seeing if they align with the reality of the market.
If you decide to change strategy, you need to then look at spending with that lens as well. With the new strategy in mind, and what costs the new strategy might require, and which are now redundant.
Review team spend
When we look at money leaks, we also need to ask if our team are delivering a positive return.
Whilst this may sound harsh when dealing with individuals, businesses also cannot afford to have team members who are not delivering to the bottom line of a business.
Request for extensions and concessions
Do not run away from your creditors. Instead of waiting for a notice of disconnection or overdue payment, communicate with your creditors or suppliers, and propose a solution. Talk about your situation and negotiate on alternative payment transactions such as granting an extension, deferring payment, or a payment plan.
Get creative and think of opportunities to stay relevant, such as creating a high demand product. Say you are a swimwear boutique owner with a lot of fabric materials at your disposal.
Use your raw materials at hand and manufacture smaller items instead of having wastage.