5 Ways Small Business Owners Can Cut Costs During a Recession
A recession, or the threat of a recession, is stressful for everyone, particularly small business owners. An uncertain economy inspires many to find ways to save money while still maintaining quality. Here are five tips for how to cut business costs during a recession.
How to cut business costs during recession
Audit your spending and manage expenses
As streamlined as automated payments are, they also make it easy to forget what you're paying for. These charges add up and if it has been a while since you reviewed your subscription software and services, you may be surprised at how much you're spending for things you're no longer using.
Look through your past bank and credit card statements and look for ways to eliminate unnecessary costs. This is also a good time to review services and software you want to continue paying for. Is there a scaled-down version that will work just as well? Could you ask about a loyalty discount or a more efficient plan the next time you renew? A few small changes can make a large impact on your overall expenses.
Review your space needs
There are many costs associated with maintaining a physical space for your small business. If you're looking to reduce expenses, then re-evaluating your space and considering your ongoing needs is a smart move.
Perhaps there are creative solutions, such as subletting unused space, or relocating to a smaller store or warehouse. Depending on your specific business, it may also be advantageous to go completely remote and use the services of a virtual office.
If large cuts are required, consider what expenses are putting the most pressure on your budget and see if there are obvious changes that can give some relief.
Evaluate your vendors
During an economic downturn, it's a good time to review your vendors and consider your needs. If your goal is to make it through the recession while staying operational, then cutting back on non-essentials may be a workable solution.
What projects can be paused temporarily? Are there vendors with lower pricing or reduced quantity requirements you could work with? Which contracts aren't worth renewing?
This is also a good time to negotiate your rates with existing vendors to see if there are new terms you can come to. Perhaps you can agree on fixed pricing, bulk pricing or ordering in different intervals to manage cash flow and inventory more effectively.
Recessions are difficult for everyone, so while cutting costs is the goal, it may not always be possible. Taking a creative, win-win approach is key when negotiating with vendors.
Reduce marketing costs
There is something to be said for doubling-down on advertising during economic uncertainty, but if you're looking for quick ways to save money now, then cutting out marketing will be a large savings.
Perhaps this could be an opportunity to find new, more effective ways to market your business. If you've typically outsourced your marketing to an agency, consider running it in-house for the interim, or finding more cost-effective ways to market your business such as SEO, content marketing or organic social media.
Cut HR costs
Eliminating positions, laying off staff members or reducing hours is difficult, but sometimes it's the only way to balance your budget. This option must be carefully considered as you likely need these employees in order to run your business well.
There may be creative ways to cut HR costs without losing any employees, such as having fewer staff members scheduled for each shift, or reducing hours of operation overall. There may also be staff members who are interested in transitioning to part time or contract work, so it doesn't hurt to ask before you make the larger decisions of cutting positions altogether.
Taking a hard look at your business expenses and deciding what to cut from where is difficult but necessary when considering how to cut business costs during recession times.