The economic landscape has been reshaped by a number of events in the last few years. First, the global pandemic took hold, seeing employers rapidly downsizing, and others completely ceasing operations.
As the pandemic seems to wind down, economic uncertainty, the high cost of business operations, and inflationary circumstances are squeezing consumers’ savings and business owners from every angle.
A survey by Goldman Sachs on 1,107 small business owners found that 91% of respondents mentioned that broader economic changes have hurt their business. Supply chain constraints, rampant inflation, which has reached its highest in more than four decades, and labor shortages have all weighed on businesses, leading them to make dire financial choices.
Zooming out even further, production and manufacturing costs have also increased. In March this year, the producer price index or PPI rose by 11.2% from the same period a year ago. If you take this on a month-to-month basis, this averaged at around 1.4%, according to reports by CNBC.
And according to JPMorgan Chase & Co CEO, Jamie Dimon, even harsher and more challenging economic times are coming in the months ahead, leading well into 2023.
Business owners are now faced with making tough financial decisions, having to increase prices without having to sacrifice the quality of their products and services.
While internal operations have increased, from staff wages, rent, and other necessities — is it at all possible to make some changes to your expenses and budget that can help you save a bit more every month without compromising on quality? Here’s how we’d do it.
Not all businesses are run the same, and neither do they share the same range of expenses. It is however possible to lower existing expenses, before making significant cutbacks on the broader business side of things. This could also help you to manage cash flow better.
For starters, look at how you can legally lower your tax bill every year and explore options that would suit your business needs while keeping your accountant happy. Various strategies include offering insurance to workers (if the budget allows), hiring employees from disadvantaged groups, or engaging in sustainable and environmentally-friendly business practices.
If you’re unsure which strategies currently exist that could help you lower your tax bill, while still abiding by regulations, talk to your accountant to help devise a plan.
You can also review your credit card processing merchant. Look at the fees and commissions card processing merchants are charging your business. Not every business might use the same merchant, and in some instances, credit card merchants might charge you more than what is required depending on their structure and how they categorize business transactions.
Buying in bulk can be cheaper, and that’s why so many consumers are looking to shop in large formats rather than buying items individually at product-specific stores.
Shopping or ordering in bulk could mean you can save a few extra dollars per purchase, and if you count that together over time, you’ll be able to see the difference it can make on your budget.
Although, keep in mind that buying in bulk requires a bit of logistical knowledge to help control and manage your business operations and the larger quantities of stock on hand.
Of course, some businesses might require a specific range of products and goods that can’t sit for too long in storage. And while it might not seem possible, consider which items are more popular or are frequently used in your shop. When you notice something is running low, purchase a large amount at once to save on production and transportation cost.
Your business was created to produce and offer clients a specific product or service — something that other businesses might not have. These items make your business unique, and help you stand out from competitors.
If you already know what these products or services may be, why faff with other unprofitable goods that are not bringing any money or seeing significant turnover.
If you notice that a line or range of products has been moving slow, or isn’t selling as well anymore, consider either reviving the range or completely discontinuing it.
Yes, there might be a few customers or clients who won’t be too happy about the change, but this could be a perfect opportunity to sell something different or new to them without losing their loyalty.
It’s perhaps time you start shopping around for newer and cheaper suppliers – even if this means cutting ties with your existing suppliers.
Many times, small businesses tend to work with suppliers they know and trust. While this is a good thing, especially when starting, it’s at all possible a range of other suppliers exist that can offer the same quality and service at a cheaper price point.
Some suppliers may offer customer incentives, especially if you’ve been a loyal buyer for quite some time, so it’s a good idea to look into that as well.
Look for suppliers that can still offer you the same type of quality, perhaps even better, without having to splurge an exuberant amount of cash every month. Cutting out expensive suppliers can help ensure product quality remains the same and mitigate the chances of the business going under.
Consider leasing equipment rather than buying if your business relies on specific equipment and machinery to manufacture products and goods.
While it may not make sense right from the start, smaller businesses that tend to have lower-lying levels of cash flow might need to lease some apparatus during the first few months or years before purchasing their desired equipment.
With that in mind, business owners can also use smaller, less expensive equipment to help them get the job done.
Let’s say you roast and sell ethically sourced coffee online, but an industrial coffee roaster will cost thousands, if not hundreds of thousands of dollars. If you’ve been getting by with a smaller, batch-like roaster that can keep up with your capacity and orders, then why consider purchasing an expensive coffee roaster that might take you years to repay.
On that note, if you notice that orders start to increase, look where you can lease a machine, or in this case, a roaster, to help keep up with demand.
Leasing tends to cost a little bit more than having your own, but for cash-strapped businesses, it might be a good idea to consider how this could be beneficial to their business in the short term.
Some entrepreneurs and business owners know the cost of retaining loyal clients and how much it can cost to win over a new range of clients. Yes, having to keep existing clients is a lot cheaper than having to acquire new customers.
With this, it’s best said to keep the clients you already have happy, even if your business is going through some financial hardships.
The clients you currently have, have supported you until now and will most probably do so for the time being. Of course, we’re not saying you shouldn’t attract any other customers, as this is still essential to running a successful business. Still, driving revenue from the ones you already have could work out much cheaper than you think.
Customers come back when they’re impressed with your service and offer, so focus on that, and see where you can improve to help attract a new range of clients.
Running a business is overwhelming, and as a business owner, you’re often expected to have a hand in almost every aspect of your business. Yes, some business owners can do this seamlessly, but not all of us are the same.
If you start to notice things you’re spending or wasting too much time on that are costing your business money, consider outsourcing those tasks to other people within the business or perhaps a third-party agent.
Whether it’s bookkeeping, accounting, human resources, or even social media, there’s always someone available to fill that position. Although we’re not completely suggesting you should hire a brand new employee or establish a new position, consider where you can outsource tasks or work to existing employees to help free up your schedule.
Focus on the things you can control and the business aspects that excite you and power you to do more.
Retail spaces in modern, busy, high-end neighborhoods can be costly. With the rate at which commercial rents are increasing, it’s only becoming more challenging for small businesses to tap into the high-end market – for now at least.
As a business owner, you need to consider what your business needs are and, in this case, what are the space needs.
If you solely operate online but pay and make use of a retail space where you can service walk-in clients or even use the space as a collection point for online orders – it’s time to consider how viable this space is for your business.
Let’s say you sell products online but also have a small brick-and-mortar location where you see a handful of walk-ins coming through the door every day. Of course, the space is also used as your production area, but you can make most of your products from home.
If you notice that rent is taking a massive chunk out of your budget each month, leaving you with less legroom to work with, consider both the pros and cons of your store-front space.
Often, and it’s not always a bad thing, small business owners rush to open their brick-and-mortar stores, only to realize later that the actual source of income and business comes from online sales.
It’s a hard and bitter pill to swallow, but if the need for a store is outweighed by financial security and well-being, it might be time to shut your doors.
The best way to make some financial cutbacks without sacrificing quality is to make operations easier and more streamlined.
Look at your business and areas where you think you can make some changes that can help you save both time and money. For example, there might be some areas where it’s possible to automate processes and mundane tasks.
There might be instances where human intervention leads to excessive and costly mistakes, which over time can accumulate. If there’s a chance that you can automate these tasks or completely take them out of the operation or production line, you might be able to save a bit of money while doing soo.
Not only will this help you save more on unnecessary spending, but you will also be able to improve your customer experience. Using automated systems, you can accept payments faster and more efficiently, get data points based on your client behavior, track orders better, and understand your customer’s viewpoint.
Look for solutions that can help simplify matters, not complicate them.
For business owners, return on investment is the most fundamental equation they can use to help ensure that their expenses add value and cash back into their business.
When you’re looking to make some cutbacks while not seeing your quality decrease, look for things that aren’t really making a difference to your business or improving operations but still costing you money.
A straightforward example could perhaps be using ingredients in food if you own a restaurant that might be out of season every few months. During out-of-season periods, these ingredients tend to be more expensive and less frequently available in shops.
As an owner, you need to consider how this is helping the business. For example, if a specific item is not selling during slower months, why keep that range of products available?
Look at your purchases and consider how you can make a return on your investment.
Every business owner these days is looking to save on costly expenses without having to compromise on the quality of their products and services. These actions all boil down to how well you know your business and how you can make tasks easier and more streamlined to help save on unnecessary expenses while also running a lucrative business.
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