“Beware of even the smallest Expenses. The smallest leak can sink a ship”. Ben Franklin
Survival Topics:Non-Essentials, Fab Costs, Scaled down, re:Leasing, Marketing, Low $$$ Ads, Out-Source, Save Time, go Virtual, Focus, using Space, Skills, Quality, Refi Debt.
Keeping your small business to survive during this Virus Crisis is comparable to steering a ship thru a hurricane. Government lock-downs & shelter-in-place orders make generating revenue downright tuff, and no Cash Flow means no business. Fortunately, you can have access to more working Capital without necessarily making sales. There’s a good chance your business already has funds to help weather the storm. It just might be tied up in un-necessary expenses. Your business is going to need to get resourceful and castoff some trivial trash to boost your Cash Flow. Cutting expenses is never easy. In the info below, we’ll take you thru a few of the best Cost-cutting tactics and help you uncover additional Capital.
#1. Identify & Eliminate Non-Essential Spending
If you’ve been in business a while, you’ve doubtlessly accumulated a fair share of un-necessary expenses, Get out your Cash Flow statement and take a look through all your monthly, quarterly, & annual transactions. Ask yourself about each expense and determine if it’s essential or non-essential to your business. If it’s essential, your business can’t do without it. If it’s non-essential, your business’s processes and path will be unchanged if it’s gone.
Essential Expenses. Do not be afraid to negotiate to reduce or get better terms. Your Suppliers & Vendors understand what’s going on during this Crisis. They will likely be willing to work with you to figure out arrangements that are more conducive to your Cash Flow. Financial institutions are also preemptively offering relief by way of Refunds & Waivers, Loan Deferrals, Payment Reductions, Suspended Charges, etc. So check with them to see what’s available. Technology companies can also provide access to their products & services at a discount, and more often than not, they are entirely “free” in response to the pandemic. A few dollars here and there may seem like penny-pinching, but small cuts can add up to substantial savings.
#2. Convert your Inventory into Cash
Inventory sitting idly by bleeds cash. Most Inventories lose value over time, and storage costs eats into your profit margins. Especially if you have a surplus of products & supplies, now’s a good time to liquidate it:
- Sell your inventory at a discount to get quick cash now and reduce storage overhead.
- Offer bulk-purchasing incentives to sell more products at a faster rate.
- Bundle items to drive more sales & larger purchase orders.
- Provide low-cost items as freebies on larger purchases.
- Consider selling products to other retailers or shops instead of direct-to-consumers—or vice versa.
Once you’ve converted your Inventory into cash, try to maintain the right balance of product moving forward. Too much, and you’ll waste capital on storage & depreciation. Too little, and you’ll lose sales and the opportunity to win new customers. Just right, and you’ll manage your costs while maximizing your wins.
#3. Cut Fab/Production costs.
As a business owner, you’re always looking for ways to cut material costs, & optimize your resources. Here are a few suggestions:
- Track & measure the operational efficiency of your business, in order to adjust & optimize the use of available resources. Set performance parameters that reflect your efficiency goals & offer incentives when those goals are met.
#4. Scale Down somewhat
While businesses are all about growth, a global pandemic is not the time to expand your business—quite the opposite. Now’s the time to scale down a little – until it’s over. Look at your business assets and determine which are “need-to-haves” & “nice-to-haves”. Do you need all the office or warehouse space you currently rent? Instead of looking to expand, maybe consider moving into a smaller office for the next couple of years or storing inventory in more “budget-friendly” Storage units rather than expensive Warehouses.
#5. Lower Financial Expenditures.
Look at your insurance policies and financial accounts for places to save money.
- Save money on insurance by comparing providers for the most competitive rate; then ask your current lender or insurance provider to match that rate.
- Consolidate insurance policies or bank accounts – if possible.
- Evaluate insurance policies to make sure you’re not over-insured or duplicating coverage.
- Don’t take on unnecessary debt. Do a thorough “cost-benefit” analysis + future forecasting when considering business expansion.
- Consider the opportunity costs and the effect of debt payments on Cash Flow. Excess debt affects company rating, interest rates and the ability to borrow in the future.
#6. Consider Leasing Equip instead of Buying
If you need equipment to get the job done, consider this option. If you have purchased equipment, maybe you could sell this equipment now to get Cash. Then you could lease only what you need with relatively low monthly payments. It might not be the most cost-effective solution in the long run, but it’ll give you the quick $$$ you need to survive. Then, you won’t have to worry about repairs, upkeep, or depreciation—and when the lease is over, you’ll likely have the option to purchase the equipment at a discount.
#7. Modernize your Marketing efforts.
Of course, you don’t want to eliminate paid advertising that is working; however, it can be worthwhile to take a look at some cheaper alternatives.
- Build your customer E-mail list and implement a Referral program. A recommendation from a current customer is far more likely to result in a sale than traditional marketing.
- Network more, advertise less !!! Clients are more likely to hire a business with a face they recognize.
- Cut marketing costs by doing more in-house.
- Increase Social Media use and reduce traditional marketing.
#8. Experiment with Low-Cost Advertising
Now’s not the time to cut your marketing spending. That’s a recipe for disaster. Remember, “When times are good, you should advertise as much as possible, when times are bad, you also must advertise to survive.” Now may be a good time to experiment with different low-cost advertising solutions: a) Email Marketing, b) Public Relations, c) SEO & Local Search, d) Google’s pay-per-click (PPC) platform, AdWords & d) Paid Social Media Marketing (SMM). These modern-marketing methods give you more insight into the cost efficiency of each channel – helping you quickly re-allocate funds away from what doesn’t work to what does.
Bonus: Revamp your Website (or create one – if you haven’t already), reevaluate your digital Marketing strategy, and take advantage of free tools to grow your business online.
#9. Out-Source Trivial Tasks
Time is money. If you can reclaim lost time, you can turn those extra minutes & hours into cold hard cash. Keep track of how you spend your time for a full week. Monitor everything — from the Emails you answer to the Conference calls you take to the Orders you fulfill. Now, attach the perceived dollar value to each of those tasks to determine how much your time is worth. If the dollar value of the task is less than your time’s worth, out-source that activity to someone else. You’ll be surprised how much more you can accomplish when you off-load your low-dollar managerial tasks in exchange for high-value work.
#10. Use efficient Time strategies.
Optimizing productivity effectively lowers your cost of doing business. Remember, “Wasted time equals wasted $$$.
- Minimize distractions and limit access to time wasters. Use apps like Focus Booster or Rescue Time to help employees focus & concentrate to stay on task.
- Utilize SW such as Paymo & Toggl to track employee time usage, time spent on different types of work activities or projects and billable hours.
- Set expectations for a reasonable amount of Time to complete certain types of activities or tasks. Offer incentives for meeting or exceeding those expectations.
- Schedule business activities and encourage employees to adhere to the daily or weekly schedule.
- Schedule a predetermined block of time for meetings. Make it clear that you expect participants to be on time, to stick closely to the agenda and to wrap up at the appointed time.
#11. Harness Virtual Technology.
Reduce business costs by operating in a virtual manner whenever possible.
- Virtual meetings help minimize travel expenses + virtual offices can eliminate the need for physical space. While we certainly don’t want to eliminate personal contact altogether, save it for the instances when it’s most beneficial.
- Technologies such as Google docs (soon to be Google Drive) or Basecamp centralize company documents and product collaboration as an alternative to paper documents and meetings.
$12. Narrow your Focus.
As a small business owner, I find narrowing my business focus to be one of the most effective strategies to improving my bottom line. By limiting the types of services I offer and projects I accept, I am more productive and produce higher-quality work.
Sub-Contract: Another way to narrow your business focus is to sub-contract. Rather than turn away business, maximize your capacity by sub-contracting pieces whenever possible. More projects = more revenue, while sub-contracting equals lower expenses. The result is a better bottom line.
#13. Make the most of your Space.
Analyze your current use of physical space. Overflowing storage, too many supplies, piles of paper files & inefficient placement of furniture and equipment are common space wasters. Consolidate or centralize the different functions or departments of your business. Use space for dual purposes. A meeting room that doubles as a break room or a storage room that holds copy and fax machines for example. The opportunities will vary depending upon the nature of your business.
#14. Maximize your Employees’ Skills.
Assess the current usage of employee experience & skills. Delegate to employees with the most skill & efficiency in those areas. Don’t use expert sales people for word processing or “numbers” people for design functions. It’s often necessary for one person to be responsible for a variety of tasks, but consider exchanging some of those tasks with another individual who shows greater efficiency.
#15. Focus on Quality.
Quality sells – whether in the form of products or services. Satisfied customers increase sales through referrals & repeat purchases. Higher quality and a solid reputation allows you to charge higher prices, which = higher revenue & a healthier bottom line.
#16. Reduce Supply expenses.
Save money on office supplies by contacting vendors to let them know you’re price shopping. Look outside your pool of traditional vendors. Large discount suppliers like BJ’s, Amazon or Wal-Mart can often beat traditional office supply Vendor prices.
#17. Refinance Expensive Debt
When your business was brand new, you might have taken on less-than-ideal debt to get things moving. Now – assuming you have an improved Credit & consistent Revenue – you can likely Refinance your old high-interest debt. You might be able to score a new Loan with better terms & rates. If you’re looking to Refinance, one of the best options available is an SBA 7(a) Loan. These Loans have large lending amounts, low-interest rates, & generous terms – making them one of the most competitive Small Business Loans. Refinancing an existing loan is an easy way to cut your monthly costs. Securing an SBA 7(a) Loan isn’t easy, but the tedious process is well worth the time investment.
Comments: What have you done well so far this year? What are you planning to improve?
fm Amer Xpress & Manta Blog 6-20 enhanced by Peter/CXO Wiz4.biz
For more Info, click on Lean, Cutting Costs.