Cutting business costs is not an ideal situation for many business owners, but it is an effective measure to keep the business alive for as long as possible.
There are many ways you can cut business costs without resorting to layoffs. If your business is struggling to stay afloat during COVID-19, here are some areas where you can decrease expenses:
Find alternative transport solutions or services in your home country that offer relatively low rates despite the pandemic. If feasible, you can save more by ordering with nearby businesses and splitting the delivery costs.
Try to renegotiate prices and fees with your distributors, wholesalers, manufacturers, and other suppliers. Although not all suppliers might be receptive to renegotiation, especially when they are struggling themselves, it’s always worth asking. If they don’t budge with prices, maybe they can extend your credit terms instead to provide some relief.
But what if they say ‘no’ to every request? If your existing suppliers don’t give you any discount whatsoever, consider looking for other suppliers that can offer you better deals. It might not be worth it to stay loyal to one supplier if it’s going to cost you your business.
Rent is perhaps the biggest problem that many business owners have since it is usually the most significant overhead expense. And with little to no customers coming in due to quarantine guidelines, businesses’ revenue decreases while costs stay the same.
When cutting business costs, talking to the landlord should be one of the first things you do. Ask them for a rebate, a discount, a rental deferment, or any relief that they can offer. They might not be able to make the rent free for a couple of months, but they might settle for a repayment plan in exchange for reduced rent.
Negotiate with municipal utility providers (electric, gas, water, etc.) to give you temporary deferments or easier repayment plans instead of letting the bills pile up. Don’t wait for your utilities to get shut off–deal with this immediately so that you can stay in business.
5. Office supply orders
Is everyone working remotely? Or are you operating with a skeletal workforce? Either way, consider putting your recurring office supply orders on hold. This includes coffee, vending machine snacks, paper supplies, toner, and other supplies that you regularly stock in the office.
Similar to recurring office supply orders, services such as the Internet and cable should be canceled or put on hold if no one is in the office or store. Alternatively, talk to your provider and ask them to suspend the service until everything is back to normal. In this way, you don’t have to spend more money on installation services all over again.
7. Your salary
In times like these, the leader must make some sacrifices for the benefit of everyone else. The pandemic hit a lot of people hard, but it can be harder for your people who are earning less than you. By cutting your salary, you can help reduce business costs and put that money back into operations instead.
8. Leased equipment
If your place of business uses leased equipment, talk to the provider to see if they can take the equipment back or establish a repayment plan. Since most companies are working from home or operating with a skeletal workforce, some leased equipment might be inessential.
Cutting your employees‘ payroll is not the best solution, but it can be the most effective way to keep everybody aboard. Consider reducing work hours, workdays, or the pay itself to reduce payroll and keep the business going. No one likes a reduced salary, but cutting payroll is a better solution than laying off a few people.
Does your business still have loans to pay? If so, ask your bank or lender if they can offer suspended payments for the time being. By doing so, you can cut business costs in the meantime and continue operations as normally as possible.
However, make sure that you understand the terms of the deferment, such as the deferment period, the due date of repayment, the interest rate, the new loan maturity date, as well as repayment deadlines.
Everyone is affected by the pandemic, but businesses are among the hardest-hit sectors in the community. As a business owner, the last thing you want to do is to let go of your employees, especially during this time, much less close your business altogether. Hence, cut costs in any other area as much as possible until you can gain traction again.