5 Expenses to Trim In Your Business Right Now
Imagine you’re walking down the street and spot a coin on the ground. At that moment, you have two choices: bend over to pick it up or walk on by.
Before you decide, let’s note that the top US economists confirm we are in a recession. And like any other recession, we don’t know how long it will last.
Does that influence your choice?
A few coins on the ground may seem trivial, but all those pennies and nickels add up, and right now, we need to be good stewards of our finances.
To not end up a statistic, you must keep an eye on your bank account balances. You need to track the amounts coming in and going out and make sure you have enough to cover your bills. This is cash flow management.
Half of the cash flow equation is spending, and now is a perfect time to think about pinching pennies. To that end, here are five expenses that you can look to cut now.
Recession-Proofing Your Business: 5 Expenses to Trim Now
Unnecessary Subscriptions
So many of the tools we need to run our businesses are subscriptions, which makes it one of the easiest expenses to cut in your business.
We’re living in the Software as a Service (SAAS) era where it feels like every product is structured as a recurring service and not a one-time buy.
A prime example is QuickBooks. Their original product, QuickBooks Desktop, was a CD you’d buy at the store every few years and install on your computer. Now QuickBooks Online is a monthly subscription.
Do you think QuickBooks Online is worth the subscription? Check out this post for a comparison between the Online and Desktop versions.
You most likely have several monthly or annual subscriptions in place, here are a few examples:
Google Suite
QuickBooks
Squarespace
Calendly
MailChimp
Canva
And so many more!
I challenge you to look at all your subscriptions and ask yourself:
Are you using them to the fullest?
Are there overlapping features?
Are annual payment plans available that make it cheaper in the long run?
For example, say you use a social media posting program like Buffer. You post to both Instagram and Twitter and schedule your posts weekly. You're not interested in the fancy features, like ideal posting time suggestions.
Buffer doesn’t offer a free plan. It's designed for power users batching lots of posts and digging deep into analytics. In this case, you're better off using a freemium subscription, like Hootsuite. It allows you to post to three platforms and schedule up to 30 posts at a time.
You may also use two programs when one would do. Right now, I’m changing my customer relationship management (CRM) software for this exact reason.
I'm switching from Dubsado to HoneyBook. One of the features I’ve identified to simplify is the calendar scheduling feature. While Dubsado has a scheduling feature, I don’t like it. Instead, I used a program called Calendly. HoneyBook has a scheduler that fits my needs. Once I complete the conversion, I’ll be canceling both Dubsado and Calendly. Having both a CRM and an appointment scheduler is redundant so I don’t need both.
Apps add new features all the time, so keep an eye out for any overlaps. Use as many features in each subscription as possible, instead of adding on more apps. You'll reduce the number of passwords to remember and save on the expense.
The last trick is to check if the subscription has an annual option. On average, you’ll get two months for free in return for your commitment. If you know you’ll use the program for a year, and you can afford to pay for it in full, you might as well get the discount.
2. Pesky Transaction Fees
Transaction fees inspire lots of debate about if they’re necessary or not. Some people argue it’s a cost of doing business and you should accept it. I agree that it is a normal cost. But, if you can get around it, then why not? The savings goes straight to profit.
Depending on how your customers pay, you may be able to save by changing the types of payments you accept. Here are some general rules, but check with your bank and payment processor for the exact details:
Cash and checks are free to accept. They cost you in time to go to the bank or ATM. Some banks charge a minimal fee to accept e-deposits. My bank, Navy Federal Credit Union, charges $1 a month for their E-deposit service. Even though I rarely receive checks, it's worth it when I do.
Electronic funds transfers are often free, although the deposits may take a week to clear. If you want the payment faster, QuickBooks charges a 1% fee, capped at $10.
Credit cards, debit cards, and PayPal all charge an average 3% fee.
Consider how people pay you and how you could encourage them to pay via your desired method. The 1-3% saved goes straight to your bottom line and increases profit. The higher your sales get, the more significant transaction fees expense will look.
A word of caution: omit the fees if you can, but don’t take this to the extreme and sacrifice sales. If you sell digital products online, it’s best to accept cards. Otherwise, you’ll lose sales and negate the cost savings.
Transaction fees may create small savings, but they add up. A few pennies weigh an ounce, but a grocery bag full would cause the bag to break (assuming you’re strong enough to lift it! I'm not).
3. Extra Labor
One of the largest line items for any company is labor, so it’s a logical expense to trim.
Be careful here though because it’s one of the hardest decisions for entrepreneurs. Before starting, I recommend reviewing your priorities. You want to align your priorities and your people.
Beware that cutting labor, especially employees, is often emotional. You know they depend on you. Plus, layoffs hurt morale for those who remain. Even if you furlough employees for a few weeks or months, they may not choose to come back when you need them again.
Being real, this is a tough decision, and you will not feel 100% certain whatever you decide.
But, you still have options to reduce your costs. (And remember, not all labor is employees – some may be contractors, so look at both types of labor: employees and contractors.)
You can lower employee expenses by cutting amenities, hours, pay rates, or benefits.
First, scale back in small ways, like amenities. For instance, switch the break room coffee from Starbucks to Green Mountain. Then look at lowering your employee’s compensation.
Most people are okay giving up a little pay, hours, or benefits if it means no one will lose their job. For contractors, you can delay a project or reduce the scope of a project.
The best practice is to choose your employees over your contractors.
Some of my clients have said they don’t want to cut contractors because they feel responsible for them. But, that’s not real. Your contractors work with other clients and they qualify for the same government aid as you do. If it helps, look at your work together as delayed, not finished. Sometimes the right answer isn’t “never,” it’s “not now.”
Right now, you’ve got to help your business through this recession. It will help no one if your company goes bankrupt. Except for your competitors.
4. Nonessential Luxuries
The next expense to cut is the non-essentials. You may not think you have many, but every business does. These expenses do not produce a tangible benefit to your customers or team, or are not urgent. This includes meals, travel, online courses, new office furniture, and the like.
While you can make an argument that each of these will benefit your team and customers, don’t do it. You’ll be playing yourself. Most of the time, customers won’t notice and your employees would rather keep their jobs.
If an expense won’t further your priorities right now, then it’s not a good use of your funds.
Meals are a logical first expense to cut. You can cut it all together, reduce the frequency, or swap out a high-end restaurant for a sandwich tray. For example, schedule meetings over coffee instead of lunch.
Next, travel. Many types of travel are not essential (and are downright dangerous now). Conferences and even some meetings are not necessary to do in person. Unless you’re negotiating or signing a big contract, consider other options. Besides, we’re all pros at Zoom and Google Meet now.
Office supplies and inventory are another expense to cut. Use up what you already have before ordering more, and reconsider what you do order. This area is ripe for waste. At the oil and gas company, my supervisor gave me an office supplies catalog and said I could order anything. At the time, the market was strong and the company stock was up. I requested a gel hand-rest for a keyboard and the matching mouse pad with a gel hand-rest. A few days later, these bright blue, ergonomic hand-rests were on my desk.
When the price of oil tanked, we were no longer allowed to order from the office supplies catalog. We had everything we needed anyways. The facilities department kept a fully-stocked supplies room in the basement.
The last non-essential expense I want to mention is educational. Online courses are frequent purchases, especially right now. You see them promoted all over the internet. Pause first. Ask yourself:
How often do I complete online courses?
Have I gone through every course I already own?
Did I go through all the freebie downloads I’ve collected?
What is it going to take to get my money back on this investment?
Most online courses promise a colossal transformation but rarely deliver. The tempting testimonials and hype around the course may draw you in, but be wise about your habits.
If you've never completed one in the past, it's not likely you will now. You may be better off spending that money on a contractor after the economy improves.
In general, I would say it’s best to save your cash right now rather than partake in these non-essential splurges.
5. Rent & Underused Property
Last, let’s talk about rent. You may pay rent for your office building, co-working space, or equipment. You should revisit all, especially since they are recurring and costly.
A recession is a perfect time to renegotiate your lease. If you’ve been a tenant for a while, it’s an extra prime opportunity. Landlords are most flexible during a recession.
If you're a member at a co-working space, consider dropping it. With the stay-at-home orders and slow reopening, you can't use it much. Check if you can pause your membership, request a discount, or cancel it. You can always join again later.
After taking a break from the co-working space, you may decide it’s a luxury. I enjoy working from home and am productive, so a high monthly fee is not worth it. Plus, I love being around my fur-babies and Nespresso machine all day!
The final type of rent you may have is equipment leases. Review if you need what you have. Especially if you’re not using a machine to its fullest, look for a more affordable alternative.
For example, if you seldom use the machine, you could rent it only when you do need it. If you use it all the time, check second-hand shops and sites. You may find a similar machine at a reduced price. Some of my clients are amazing at finding these types of deals!
Next, research new products. You may find a new model or tool to increase efficiency. Even if the rent is the same: higher efficiency = lower cost per unit = gross profit higher.
Get Your Business Recession Ready
To recap, you should start trimming expenses in these five categories:
Subscriptions
Transaction fees
Labor
Luxuries
Rent
Focus on your long term vision and sustainability. Survival is the name of the game now. I don’t want you to become another statistic.
Remember if you cut something now, it doesn’t prevent you from using it again later. It’s in everyone’s best interest that your business survives the recession. Do your best to stay lean and hold on to your cash. And don’t forget to pick up any coins you find along the way.
As inspiration, I want to leave you with a Winston Churchill quote: “If I had more time, I would have written a shorter letter.”
Be intentional with every dollar you spend.
You often don't need everything you have; be astute in reviewing your expenses. It's wise to use this recession to make a better, leaner company that can last for years to come.