As the economy continues to struggle and many businesses are faced with prolonged dips in sales, many SBOs are getting creative to stay afloat. This includes cutting costs and reorganizing expenses based on new developments.
The 2 Levers of Profitability and Financial Sustenance
Whether it’s a small business, global organization, or your own household, there are two levers that impact your profitability and financial sustenance:
- Increasing revenue. The first (and most obvious) choice is to increase revenue. If you sell more products at a higher profit margin, you generate more revenue. Plain and simple.
- Cutting costs. The other lever is to cut costs. By lowering your monthly expenses, you increase profit margins and require fewer sales to remain solvent.
Forgive us if you feel this is basic or elementary, but sometimes the simplest concepts get lost in the midst of chaos. Even some of the world’s largest companies seem to get so caught up analyzing revenue that they forget about the importance of cutting costs.
You could say a dollar saved is a dollar earned. So rather than wasting energy worrying over revenue that likely will not return until there are significant improvements on a global scale, try focusing on what you do have direct influence over.
Cutting costs doesn’t feel sexy, but it’s practical and proactive. And the more you commit to slashing expenses, the better you can survive this pandemic and set yourself up well for the future.
Practical Tips for Cutting Costs
Only you know what your balance sheet looks like, but here are a few simple tips you may consider implementing to cut costs and remain in business during these turbulent times:
1. Outsource Marketing
Hiring an internal marketing team is the path most small businesses take, but it’s way more expensive than most business leaders initially realize. Even if it’s a one- or two-person team, it can set you back hundreds of thousands of dollars.
“Benefits, bad hires, and office space don’t come cheap, and assembling an expensive in-house team can be a headache,” EAG Advertising & Marketing explains. “If you put pen to paper and figure out the costs, the return on investment may not be there to hire an in-house team of experts.”
One alternative is to use outsourced marketing services. With this option, you can outsource your marketing to a single person or an entire team of marketing professionals. Not only do you save money on things like payroll taxes and benefits, but you get access to enterprise software and greater experience. Plus, an outsourced team typically works remotely. This makes it a safe choice for everyone involved.
2. Implement More Automation
Anything you can do today to automate a manual process will save you time and money on an ongoing basis. Marketing is one example of an area where increased automation can save cash. But you can also automate elements of accounting and bookkeeping, customer service, and administrative tasks.
In addition to automation, try hiring a virtual assistant to offload time-consuming and repeatable tasks that eat up the hours of more expensive employees. You can then reallocate their time to value adding actions and/or lay them off (if necessary).
3. Go Paperless
For many years, we discussed the idea of a paperless office, but implementation was cumbersome. Today, the technology exists for any office to go completely paperless with minimal friction.
Going paperless isn’t just about saving the environment. It’s also about saving money. Research shows that for every $1 spent on printing another $6 is spent on distribution. Companies spend thousands of dollars per year on paper and, with a few properly optimized digital solutions, virtually all of this money could be recouped.
4. Join a GPO
Are you familiar with group purchasing organizations, or GPOs? They’re basically groups where businesses in a similar or related industry pool their resources together to purchase products and services from suppliers/vendors at a discounted rate. If you find there are still purchases you must continue to make, joining a GPO could slash costs and save you thousands.
Adding it All Up
At a time when you have minimal control over sales and revenue, shifting your focus to slashing expenses could prove to be a profitable decision. If nothing else, it gives you a real opportunity to stay afloat while you wait out the storm.