Maximizing profits and minimizing expenses is vital as a small business owner- especially in times of economic uncertainty. However, it’s essential to do so without hindering growth. So how can you strike a balance between cutting expenses and continuing to expand the reach of your organization? Here are some strategies:
Review and prioritize expenses:
In 2010, as reported in the Harvard Business Review, researchers analyzed the corporate strategy and performance of 4,700 companies before, during, and after the global recessions of 1980, 1990, and 2000. According to their analysis, 17% didn’t survive the recession—these companies went bankrupt or were acquired. About 80% survived but hadn’t regained their pre-recession growth in sales and profits three years after the recession ended. The interesting group was the 9% that didn’t just survive; they thrived, outperforming the competition by at least 10% in sales and profit growth.
What set these companies apart? They weren’t necessarily growth leaders coming into the recession. They didn’t cut costs faster and deeper than their rivals, nor did they invest heavily. Instead, they cut costs mainly by improving efficiency and continuing to invest in marketing, which added substantially to sales and profits post-recession.
Instead of taking a knee-jerk reaction and immediately cutting your budget, list the core expenses necessary for your business to function. These include items such as rent, payroll, utilities, materials, and other essential costs that you can’t do without.
Then, look at non-essential expenditures such as events, business cards, brochures, non-essential subscriptions, office supplies, travel budgets, team perks etc. While some of these might feel essential, determine how much you can trim from your existing budget without negatively impacting operations or employee morale.
Embrace technology:
Utilize tech solutions to automate processes and reduce labor costs. For instance, implement project management software or customer relationship management (CRM) systems to streamline operations and improve efficiency.
Reduce overhead costs:
Look for ways to minimize overhead expenses. Consider downsizing office space, re-negotiate lease agreement, or switching to remote work arrangements.
Outsource non-core functions:
Consider outsourcing tasks that are not directly related to your core business. Outsourcing accounting, HR, or IT support can be some of the most cost-effective ways to do this.
Implement cost-effective marketing strategies:
Explore low-cost marketing channels such as social media, content marketing, email marketing, or referral programs. Focus on targeted marketing efforts that reach your specific customer base while minimizing costs.
The first step to being able to analyze your financial data and make thoughtful decisions to efficiently grow your business is to ensure that you have up-to-date and accurate financial reporting. Working with a bookkeeper monthly is a great, cost-effective way of doing this.
