In uncertain economic times, and especially when business is slow, it’s important to take steps to shore up your weak areas and focus on the basics. This is true for businesses of all sizes, and especially important for small business. Below are five cost saving tips to help you get started.
1 – Cashflow is the lifeblood of your business.
Review your cashflow daily and look for ways to improve it. Consider leasing equipment instead of buying it. Negotiate with suppliers to extend your payment terms. Find ways to deliver higher value and perhaps increase prices as a result. Chase down those errant customers who have taken longer than agreed to make their payments. One company realized they weren’t invoicing their customers in a timely fashion, and when they turned that around, they suddenly had millions in new-found money!
2 – Be flexible
Scan the external environment continually to stay on top of changes. Look at all your expenses and see what you might convert to variable vs. fixed costs. Move to more part time employees who don’t receive health benefits. Reduce the benefit coverage share the business pays vs. what the employees pay.
3 – Modify your product or service offerings
If your focus was on the high end market before, perhaps you should take a look at ways to serve the lower end consumer. Create a profile of your customers at all income and education levels. How are their needs similar or different? What products or services do you have to fit those needs? Who might be your best customer over the next 6 months to a year?
4 – Have a conversation with your banker
Develop a good relationship with your banker and keep him or her informed of your business situation. Together, you might identify some alternative strategies to help you weather the tight financial conditions.
5 – Cut unnecessary expense
No expense is too small to address. For example, if you buy bottled water for your business, consider alternative means to supply water. Bottled water is by far the most expensive way to provide drinking water. A few dollars a month can add up to a significant chunk of money by the end of the year.