Business crises come in many forms. Whether you’re experiencing a direct business crisis such as a sudden departure of key staff, or a socioeconomic crisis like the one we went through during early 2020 when COVID ravaged the country, the steps taken to survive that crisis are the same.
No matter what you do during an economic crisis, one thing is key: You must cut costs.
The skill in doing this is to cut those costs without overly affecting your potential for getting new business in the future.
If you’re looking for ways to reduce expenses in your business or simply hunting for general business cost-reduction strategies, this five-step guide to cut costs in your business will help you.
Step 1. Establish Your Business Type Precisely
What type of business do you run?
You need to break your business down into one broad category, then another.
The first broad category is the business industry, such as hospitality, travel, luxury gifts, financial, legal, etc.
Sure, of course you know your business industry by now, but sometimes these lines are blurred for smaller businesses who tend to do “a little bit of everything”, or even massive businesses that have their “fingers in every pie”.
Once you’ve nailed down your industry precisely, you need to establish if you cater to high-end or low-end clients.
Only after this step is done can you determine the best areas to start saving costs immediately — and thereby carry out a triage.
Step 2. Carry Out an Immediate Triage
The triage is a method of handling a medical emergency: When you are overwhelmed by a sudden influx of medical patients, medical practitioners will address the most severe injuries first.
This ensures maximum survival and efficiency.
After establishing your business type precisely, it’s important to discover where your biggest cost savings might occur without damaging the business!
For example, let’s say your business type breaks down precisely to:
- Luxury Gifts Provider
- High-End Market
Let’s say that one of your speciality products is extremely fine pens which cost an arm and a leg.
Well, an average Bic pen costs a hundredth of your fine pen.
Of course, you’re not going to stop ordering the fine pens — you’d go out of business!
But if your business type is:
- Affordable Gifts Provider
- Middle Market
Then knocking off those fine pens from your repertoire might be the best move for saving costs immediately.
To effectively carry out a triage on your business costs, you need to look at your earnings and your expenses. It is therefore vital to have your bookkeeping up to date.
Step 3. Spend a Little to Save a Lot
It might seem counterintuitive to spend some money in order to save it.
But in this world of high-efficiency digital services, it is quite phenomenal how much time can be saved by investing as little as a hundred or two-hundred quid in a tool which helps you become more efficient.
There are two ways this can save you money if done correctly:
- Directly, such as signing up for an online payment service which is cheaper than the one you’re currently using.
- Indirectly, such as signing up for something that will save you time.
Again, this depends very much on your industry and your precise market, but here are some ideas of places you could look at to start saving money by investing in an online solution:
- CRM software to reduce wasted time and improve lead follow-up
- Web conferencing software to immediately reduce office costs by allowing people to work from home.
- Team Collaboration software for the same reason.
- VOIP software to reduce international phone costs.
Step 4. Spend Less on Marketing While Doing More
The marketing budget is a tricky one. It’s so easy to overspend and get no return, and yet equally easy to underspend and get even less return.
A balance must be struck.
Marketing people are specialists with valuable skills. At the same time, a boss or CEO should know a little about marketing themselves so as to evaluate marketing suggestions and strategies.
Indeed, a boss or CEO should have an overview of every aspect of their business in order to determine if what is carried out below them is financially sound.
A CEO who does not know what is likely to be ineffective risks having the financial rug pulled out from under them in business.
As for marketing, it’s vital for a CEO or marketing executive to understand all the cost-effective options which exist out there, allowing people with little marketing skill to do more.
Some examples of these highly cost-effective marketing tools include:
- Canva.com, for general marketing design.
- WeVideo.com, for video editing.
- Various CRMs to keep track of leads, manage funnels and thereby close deals.
Step 5. Make Your Quality the Best It’s Ever Been
Quality trumps quantity, even if you’re in the “budget” sector.
Besides, “budget” clients can sometimes end up being more expensive than premium clients.
Focusing on quality gives you better chances of getting repeat work. Repeat work means you’ll have to spend less on marketing to gain new clients, thereby saving business costs indirectly.
If you establish your business’s industry and target market precisely, you can then carry out an informed triage on your most pressing costs.
Spending can sometimes lead to saving. Spend in the direction of products and services that will:
- Save you money directly or
- Make you more efficient, thereby saving you money indirectly.
Market wisely and efficiently to cut business costs, and make sure that you as the CEO or manager know the jobs of your juniors so you can tell if any of their ideas are financially risky for the business.
Finally, increase your quality to the best it has ever been and save costs indirectly as a result of obtaining more repeat business.
Did you notice that none of our cost-saving ideas for business required laying off staff? That should be an absolute last resort, because staff are people, and good people are worth far more than money.
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.