If you’re considering ways to save money for your business, it’s likely you’ve already implemented the basics, such as cutting back on non-essential. But, in particularly challenging times, cuts may need to go further and it can be tricky to know how to save money without compromising on the future growth of your business.
In the latest episode of our Business Class: Money Minutes podcast, we speak to four entrepreneurs who experienced plunging revenues overnight. Their ingenious money-saving measures show that sometimes being forced to think-outside-the-box can yield long-term benefits for your business.
Here Sharmadean Reid MBE, Hannah Rhodes, Polly McMaster, and Sukhi Jutla share how to save money and make your business stronger.
1. Understand your runway
Rigorous business scenario planning is crucial for understanding how long your business can survive without making any money, says Polly McMaster, who overnight saw revenues slump 15% after temporarily closing the flagship store of her womenswear business, The Fold.
She recommends taking the worst-case scenario, then working out how long you could continue to pay your bills and team and keep everything going for under this situation. This data will tell you what your “runway” is and therefore how far any cost-trimming measures need to go.
2. Outsource expertise
Outsourcing expertise rather than hiring in-house can save money and ensure quality, says Hannah Rhodes, who was about to hire a marketing manager when the pandemic sent revenue of her craft beer company, Hiver Beers, tumbling to just 12% of what it had been even a week before. Instead of spending £50,000 to £60,000 a year on a full-time hire, Rhodes instead outsourced the work to an agency, saving Hiver as much as £125,000 year-on-year.
“Outsourcing to a third party model has been a night and day difference not just in terms of cost but quality and expertise surrounding the business and supporting it; it’s a much easier and more natural conversation around ROI when you’re employing a third party to do a project for you,” says Rhodes.
3. Talk to your customers
In times of change, McMaster suggests going to the “frontline” and asking your customers for feedback. This can help you prioritise where to invest and where to make cutbacks, by showing you what products or services they love most and the ones they can live without. “We did a big and very detailed customer survey,” says McMaster. “This is where we have really been able to take a lot of learnings and build that into our product development.”
4. Don’t be afraid to pivot
If your product or service doesn’t suit your customers needs in the current environment, don’t be afraid to adapt, says Sharmadean Reid, who pivoted the her beauty marketplace app, Beautystack, when face-to-face appointments were banned under the UK Government’s stay-at-home guidelines.
“Our cash reserves were going down and down while our metrics were basically completely flat,” says Reid. “I started to think about long-term business evolutions or pivots that could protect us in the future,” she says. Beautystack now includes a virtual events booking feature.
5. Drill into data
Data can quickly give you visibility on areas where your business may be losing money and therefore where savings can be made. Hiver Beers implemented a new data dashboard for £250-a-month, that Rhodes says helped her to get to the bottom of leaky margins. “It has saved man-hours and meant we can be really specific about exactly where wastage is coming and really helped us to be more lean and efficient,” she says.
6. Pick-up the phone
When your contracts are up for renewal, it’s a good idea to pick up the phone and negotiate a new deal, says Sukhi Jutla, founder of MarketOrders, a B2B wholesale gold and jewellery platform. She has managed to save 30% on her monthly Wi-Fi costs by speaking to her provider on the phone.
“Many of us don’t question or have the courage to negotiate better prices, we sometimes think we have to accept what is given to us,” says Jutla. “It sounds like a bit of a pain to pick-up the phone but it really does help.”
7. Set up dedicated time to scrutinise your balance sheet
Ring-fence some time every week to scrutinise every line-item on your management accounts, says Jutla, who does this every Friday. “The number one reason startups and businesses fail is because they simply don’t have an awareness of incomings and outgoings of cash and market orders,” she says. “I literally open the bank account and look at every single transaction and ask myself if I recognise it."
Identifying business efficiencies can help you make significant long-term savings and set your business up for success. With an American Express® Business Gold Card, you get up to 54 days¹ to pay your bills, giving you more time to assess different types of outgoings – and whether they are really essential to the business – before committing to further spend.
What’s more, you can also earn Membership Rewards® points for your spend, which you can use to further grow the business.
Listen and subscribe to the Business Class: Money Minutes podcast on Spotify here, or you can find it where you listen to podcasts.
- The maximum payment period on purchases is 54 calendar days and is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date.
- Membership Rewards points are earned on every full £1 spent and charged, per transaction. Terms and conditions apply.