If you’re like many businesses, the impact of the pandemic and the influence of other negative factors over the past two years have hit hard. You may still be suffering from lost income. Clientele may be down. Inventory may be in short supply. Whatever the specifics, you may find it harder today to pay your bills, or you may be watching your business savings draining away. It’s scary, but it’s not hopeless. And the ideas here can help you reduce expenses so you can get back on the road to rebuilding your financial resources and your confidence.
1. Reduce or eliminate non-essential expenses
This is the easiest place to start cutting costs. Non-essentials can include anything that’s nice to have but not necessary, like the best quality pens or a fresh office paint job. Even small reductions can add up over time. Eliminating recurring monthly expenses can make an even bigger impact. For example, consider if there are subscriptions you could cancel, and re-evaluate landline, mobile phone and broadband contracts.
2. Re-evaluate vendor contracts
Consider putting out bids to see if you can get better prices without sacrificing service or quality. Your current vendors may even offer discounts, add-ons or loyalty rewards to keep you. Review your full list of vendors and contracts, including janitorial service, accountants and so forth.
3. Renegotiate your lease — or move
With so much office space sitting empty, if you rent, you may be able to negotiate a lower rate in exchange for renewing your lease, especially if your contract ends soon. If you’ve downsized your business, you might be able to sub-lease any space you aren’t using (if your rental agreement allows it).
Alternatively, you could look at moving to a lower-priced or smaller space when your lease ends. And for certain types of businesses, switching to a co-working office arrangement could make sense and dramatically reduce your overhead.
Similarly, if you have owner-occupied real estate, consider whether it’s time to relocate to a smaller building. Or maybe you can reconfigure your existing space and lease out what you’re not using. This could provide another consistent revenue stream in difficult times. Finding a tenant whose business complements yours may even increase revenue and sales by drawing new target clients to your location. Be careful not to rent to a business that could hurt your brand, though.
4. Revamp advertising and marketing strategies
When your budget is tight, you may need to cut back on traditional outreach tactics, like billboard, radio and magazine advertising. But you don’t want to completely abandon promotional efforts. Review performance metrics and eliminate strategies that haven’t produced results. Then look for less-expensive outreach options, such as email marketing and engaging loyal customers as brand ambassadors.
Organic or earned media is free and can potentially generate far more business than purchased media. For instance, learn who publishes reviews for your industry or area. Get involved in the community and make donations — a restaurant might give meals to the local hospital, for example. Host high school kids interested in your industry, tell them about your business, post photos of the event (with permission) to social media and reach out to publications regarding the event. You’ll be helping students, your community and your business.
5. Assess equipment and supply needs
Inventory current supplies and look at historical usage. Can you order smaller quantities of supplies or fill orders less frequently? Alternatively, see if you can get a discount for a bulk order — which could also help ensure you’re stocked up now in case of supply shortages or delays later. Explore less expensive alternatives to the brands you’re accustomed to buying or the sellers you’re buying from, as well.
Inventory your equipment, too. If you don’t need it or use it, sell it or cancel the lease. If you’re still paying on it, ask the lender about payment assistance options. And if you can make do with what you have, then put off new equipment purchases or rentals.
6. Review insurance policies
Don’t leave yourself vulnerable but do make sure you have the coverage you need and no more. You may want to cancel or scale back on less critical policies, such as key employee or business interruption coverage. For the policies you keep, consider whether you can increase deductibles or bundle policies to reduce monthly premiums. Don’t be afraid to bid out your insurance — and let your current carrier know. They may offer more competitive terms to keep your business.
7. Adjust perks, benefits, wages or staffing
Before you get to the point of reducing staff, consider whether you can reduce payroll expenses enough just by shortening the work week. Many businesses have been forced to do this, anyway, due to staffing shortages. Also consider whether to cut back on perks, like free lunches at company meetings, paid parking spaces or gym memberships. As a last resort before layoffs, assess other employee benefits to identify if any can be reduced or eliminated.
We’re here to help
Every business is different, so consider these ideas as a starting point. Take the time to dig into your specific expenses and needs. Your Hancock Whitney team can help. Visit a nearby financial center or call us at 1-800-448-8812. We’d be happy to review your business banking relationship and business plan with you, to help identify ways that your company can reduce costs and start 2022 on firm financial footing.
“10 Simple Ways to Cut Business Expenses,” Matt D’Angelo, Business News Daily, updated Oct. 24, 2021, https://www.businessnewsdaily.com/5852-cut-business-expenses.html, accessed Nov. 11, 2021
“How to Cut Costs and Spend Less in a Cash-Strapped Business,” Bethany K. Laurence, Nolo, https://www.nolo.com/legal-encyclopedia/free-books/small-business-book/chapter2-4.html, accessed Nov. 11, 2021
“10 Ways to Drastically Cut Business Costs,” Katharine Paljug, Business.com, updated Feb. 27, 2020, https://www.business.com/articles/5-ways-to-drastically-cut-business-costs/, accessed Nov. 11, 2021