If your small business is running into financial issues, one of your only realistic options may be drastically cutting expenses. With lower expenses, you may be able to make ends meet long enough to support better long-term changes.
But how do you do it without sacrificing the entire business in the process?
Short-Term and Long-Term Fixes
First, understand that if your business is going to survive long-term, you’re going to need to employ both short-term and long-term fixes. Short-term fixes are going to “stop the bleeding,” helping you control your expenses and get through this most difficult financial period, while long-term fixes are going to provide you more financial stability, so you’re less likely to be in this position in the future.
Oftentimes, long-term fixes require financial investment and time to pay off, making them less than ideal in the near-term. For example, investing in fleet management software can eventually reduce your fleet management expenses. But in the long term, these strategies pay off — making them an indispensable choice after you’ve proverbially stopped the bleeding.
Cutting Expenses Quickly
These are some of your best strategies for cutting expenses quickly in a business that’s struggling:
- Lay off staff or reduce hours. The decision won’t be an easy one, but one of the fastest and most straightforward ways to reduce expenses in the business is laying off staff members or reducing hours. Labor happens to be one of the biggest expenses most businesses base, and it tends to be associated with a lot of waste. Make a thorough assessment of your current team, the current allocation of responsibilities, and see if you can make any smart cuts.
- Cut subscriptions and unnecessary services. You’ll also want to review any services you’re using or subscriptions that aren’t truly necessary to the core of the business. Over time, businesses often get bloated with different types of subscription software and secondary and tertiary services. Periodically, you need to clean these up.
- Scale down the physical business. How much are you paying for your office space or your physical storefront? Do you really need all that space? Scaling down your business by moving to a smaller and more affordable space, or operating fully remotely, could be exactly the move you need.
- Minimize utility costs. Depending on the nature of your business, utility costs may have the power to kill your profitability. Make a smart assessment of your energy needs and how much you’re currently spending on utilities. What strategies can you use to minimize your spending immediately and in the future? For example, can you make it a point to turn off equipment when it’s not being used or upgrade your lighting to be more energy efficient?
- Start bartering. Your business has short term needs, but you may not have the cash to cover those needs. If this is the case, consider an alternative: bartering. Bartering and negotiating with other local businesses could be a great way to get what you need without spending a lot of money.
- Improve efficiency in sales and marketing. Sales, marketing, and advertising costs tend to run high, especially in high-profile campaigns. Consider scaling back your efforts here, at least temporarily, and look for ways that you can streamline efficiency with free and inexpensive approaches.
It’s also a good idea to supplement your income, if you can. Having more money coming in can help you cover your rising business expenses and equip you with more financial stability.
- Sublease your space. Depending on the terms of your lease, you may be able to sublease your business space. Essentially, this means letting another business into your space so the space is fully utilized; the new business pays you a monthly fee in exchange, supplementing your rent payments.
- Add services. Consider offering more services to your clients. If they already like how you do business, and you have a good relationship with them, you may be able to sell them on something new, especially if it’s inexpensive or temporary. Brainstorm new services your business can offer and see if you can land a few new deals.
- Establish a line of credit. If you’re still struggling to make ends meet, or if you need more cash on hand, consider establishing a floating line of credit for your business. As long as you’re attentive, and you prioritize paying this off, it can be an excellent financial tool to help you through difficult periods.
These are just some of the ways that you can quickly reduce costs in a growing business. Obviously, these strategies alone aren’t going to be enough to establish a strong foundation for the future of your venture, but they could be a great start.