Inflation is a hot topic right now. It is creating an especially rough time for small businesses. In this environment, you see a lot of advice floating around relating to cost-cutting.
With these cost-cutting tips, you will be ready to do so in a smart way!
Not All Cost-Cutting Is Good Cost-Cutting
Before we get started, it is critical that you keep this in mind. Some sources will suggest cutting almost everything.
In the world of financial advice, some sounds good on paper but does not apply in real life.
For example, a common cliche is that if only everyone stopped buying coffee out, they would be homeowning millionaires.
While things like this make for good clickable inflammatory titles online, the truth is far more complex.
Ultimately, you are cutting costs to save your business. All cuts should be made to make it more efficient. You don’t want to cut so much that you harm your business’s critical functions.
With that in mind, let’s take a look at some general cost-cutting tips and avoidable traps that could help you streamline your business!
Cut Down On “Extras”
In business, these things are often called “discretionary expenses” or “fat.” These are non-essential things that your business pays for.
If you can’t think of any off of the bat, here is something you can do. Write down the mission of your business. Then, write down only exactly what you need to make that happen.
Here is one big thing that many small business owners spend on without realizing. Pay attention if this is draining your resources.
Subscriptions are a big potential drain. This includes magazines and newspapers, but can also mean apps, digital management tools, and suites.
It is not uncommon for people to accidentally pile on subscriptions over time. Check and see if you have accumulated any that your business isn’t actively using.
One of the Best Cost-cutting Tips? Be Open to Remote Work and Play
If you or team members are often traveling for training, seminars, and even meetings, switching to virtual meetings where possible can really cut down on costs.
If possible, letting employees work from home some of the time, or entirely, can also really lower those costs.
Of course, you want to keep your team motivated and connected. However, if times are tough, big retreats, conferences, and events should not be your priority.
This is especially true if they involve traveling. If you still want to have team-building or celebratory events, make them virtual where you can.
Do An Inventory/Services Audit
Take a close look at your offerings and pay attention to what sells the best. Of course, in almost any business, it is natural to have products or services that sell better than others.
One easy thing you can do to reduce costs is to focus on what you sell most of.
Especially in the case of products, why do you need to have an entire storage room stocked full of things that people don’t buy that much of?
If you have already built up a full inventory, and have a lot of your less popular products on hand, wait to order more.
In the long run, waiting to reorder and restock your less popular products will save you money.
Rethink Your Supplier And Vendor Relationships
One highly recommended tip in inflationary periods is to try and work out contracts with suppliers. In these contracts, you will pay a certain amount for something over a length of time, regardless of inflation.
These contracts are actually mutually beneficial. Suppliers get guaranteed business for a length of time in a volatile environment.
You, on the other hand, will know what critical materials cost for a length of time regardless of inflation.
Also, during economic downturns, everyone is impacted. This means that suppliers and vendors are trying harder to keep their customers as well.
Many may have special offers and discounts available. Shop around, and don’t be afraid to switch if you find a better deal that helps you cut costs.
Don’t Cut Marketing
One critical error that many businesses make during economic downturns is to panic and cut essential operations, like marketing.
If your business is young, you have never dealt with a recession before. Many young businesses will likely make the error of completely cutting all of their marketing efforts.
This is a bad idea for a few reasons.
For one, if you keep going, you can possibly pick up the customers that other businesses lose by abandoning marketing. In a less crowded marketplace, you will be more visible.
Also, the last thing you want is for customers to forget entirely about your business and brand. Especially if you have spent years building that up. It can take years to rebuild that if you lose it.
Remember, modern marketing does not have to be insanely expensive, thanks to social media.
You don’t need to worry about having the upfront capital for film and TV show product placements or ads on mass media anymore.
All you need is a smartphone and a social media account or two.
Final Thoughts on Cost-Cutting Tips For Small Businesses
Ultimately, economic downturns pose a lot of challenges. However, they can also create opportunities to rethink how you do things and move forward in a more cost-efficient manner.
For example, as many companies abandon marketing in economic downturns, you can seize the opportunity by making sure yours is extra visible.
Also, you may discover that remote work benefits your business greatly. That is powerful knowledge to have.
Hopefully, these cost-cutting tips have inspired you to move forward with your business in a strategic way that helps it thrive.
Even simple things, like canceling unused subscriptions or finding free options, can really add up over time.
Say, for example, you have been paying $35 a month for a task management platform that your team does not like and does not use. If you cut that, it will save you over $400 a year.
If you can find 10 or so things like that to cut, it may save you thousands a year.
What do you think? Comment below.
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