Many business owners will find sales slumping now and again as trends, seasons, and buying habits change, and no matter what, slow sales mean a threat to your profits. Or do they?
Objectively, if you’re not bringing in as much money, yes, your profits will suffer, but there are fortification tactics — cost reduction methods — at your disposal. Just like in your personal life, when money gets a bit tight, you scale back: maybe you start buying store brand ketchup, eat out less, etc. Here are a few things to consider in order to cut costs and help your profits.
Invest in your team
Your payroll is typically the largest overhead cost you’ll incur and one of the first to be slashed when a company is in trouble. That being said, quality employees can be difficult to find, so it’s best to train and promote internally, while paying enough to retain great employees.
Where you can cut costs is through cross-training employees so that they can perform other functions when their core roles are slow. It is also a great idea to consider part-time or seasonal employees, which can help cut down on your benefits, other insurance and vacation costs.
Monitor your marketing efforts
Marketing and advertising budgets are often cut when reducing costs, since it’s often assumed that those dollars are better spent fortifying the business internally. While you may want to tighten up your marketing budget, eliminating it entirely could be bad for business.
Your marketing is what generates business prospects, and if you’re not actively working to grow, your current slump may turn into a prolonged period of loss. Instead of reducing your marketing to the bare minimum, review the efficacy of your current marketing through tracking and measure your results. Spend your money effectively instead of throwing it away on advertising that doesn’t work.
Perform a supplier audit
Have you negotiated the best supplier contracts possible? Are you buying from the right supplier to begin with? Consider both of these and always shop around before getting into new supplier relationships. Check with competing vendors to make sure you’re getting the best bang for your buck.
Always check your invoices for accuracy and inquire about discounts for paying early. A supplier audit can also help with quality assurance through process optimization.
Have you considered outsourcing?
It can be an ugly word to the general public, but outsourcing may be necessary to keep your business going strong. Are there any functions of your business that would be cheaper if outsourced?
Conversely, are there any functions that you are currently outsourcing that would be cheaper if performed internally?
Monitor employee spending
If you have employees with company credit cards or expense permissions, it’s important to track spending and create detailed budgets. If possible, minimize the number of employees with spending power and also try and diminish the number of people with company cell phones, which can unnecessarily eat away at your bottom line. Monitor usage and make sure that company cell phone plans include necessities only. Not everyone will need unlimited data and calling between the U.S. and Canada.
Minimize travel expenses
The best way to control your business travel expenses is to be proactive when booking flights. Look for seat sales and book well in advance when possible. When you can, book with travel agents who offer a 24- or 48-hour cancellation policy for flight bookings when rates go down.
When booking hotels, there’s no need book 5-star accommodations everywhere you go — it doesn’t necessarily reflect better on your business. Be price-conscious, do your research, and book hotels that won’t blow your travel budget. When possible, book through travel agents and services that offer a “lowest rate guarantee.” You’ll be able to book your rooms, and if a better rate becomes available, you’ll get it.
Also try and keep per diems reasonable. Don’t shortchange employees who may rely on them, but don’t provide enough for a full steak dinner at every meal. Be realistic.
Make effective use of automation
Are there any functions within your business that could be partially or even fully automated? Automation would allow the employees that take care of those functions to perform other duties, increasing productivity.
There may even be opportunities for automation to fully replace an employee. While no employer likes to terminate workers due to slow business, it may unfortunately be necessary. This is where the cross-training mentioned above will help you retain key employees.
There are many more ways to reduce your costs; all you have to do is look for them. Get creative with it, but do be careful not to take money out of areas of your business that may be important for growth. Just “trim the fat” when needed in order to build your business back up to profitability.
If you have any questions or would like more advice on how to manage your business costs, please don’t hesitate to call Beal Business Brokers & Advisors at 204-478-7266 or send us an email.