It appears that owners may be looking at other cost-cutting strategies beyond layoffs and wage reductions to impact their bottom lines.
According to a January 2018 stat from the Bureau of Labor Statistics, average hourly earnings of all employees on private, nonfarm payrolls have risen 2.6 percent over the year.
So, how are businesses both supporting rising payrolls and cutting costs on other line items to maintain growth and profitability?
1. Cut the fringes.
In 2017, The MECCA Group, a Washington, D.C.-based mental and rehabilitative health practice and consulting firm, learned that the building that they had called home for the past four years was going to be demolished.
Although they had outgrown the two small offices they rented in their shared suite, finding a larger space in downtown D.C. would be difficult due to their budget. (The company had taken a bit of a loss financially.)
"In order to implement cost-cutting strategies to help prepare for our move and what would likely be a much higher rent, we had to be creative in finding ways to assure things would happen," says Dr. Keisha L. Mack, a co-owner of The MECCA Group.
—Dr. Keisha L. Mack, co-owner, The MECCA Group
They reviewed the upcoming year's budget and made the decision to reduce line items for meals and entertainment, professional development and other fringe benefits allotted to partners, such as assistance with student loan debt.
"We were very careful in our decisions, focusing on cuts which would have little impact on the day-to-day functioning of the office and little to no impact on our staff," Dr. Mack explains. "We took the bulk of the cuts."
2. Cut administrative costs.
For Princess Mhoon of Princess Mhoon Dance Institute in Silver Spring, Maryland, identifying and reducing administrative costs were invaluable cost-cutting strategies for her business.
"I have found managing our day-to-day finances on QuickBooks, rather than hiring a bookkeeper, to be an easy cost-cutting measure," Mhoon says. "I enjoy getting up-to-the-minute financial data at a fraction of the cost."
Bo Davis of Wasabi Sushi of McLean, Virginia, agrees.
"To help Wasabi through the economic downturn, we focused on cutting administrative costs," Davis says. "Anywhere that was not client-facing or employee-facing, we sliced. My wife came in to absorb some administrative functions as well, so it technically reduced 'payroll' without making additional hires. Further, we used an industry-popular software that specializes in helping restaurants minimize administrative costs."
3. Find creative revenue sources.
Davis was successful at accessing additional revenue sources. For example, he used a one-year loan option to provide working capital. That loan allowed his company to focus on better margins.
The MECCA Group decided to sublease some of the office space in their new and much larger suite to other mental health practitioners. These business owners didn't need full-time office space, but needed a nice furnished office space to meet with their clients.
"There were hours in the day or days of the week when our office space would be used less. Instead of having it sit empty, we would make money to help offset the cost of the increased rent," Dr. Mack says.
As a result of cutting costs and their creativity, the business is flourishing once again.
4. Barter with other businesses and tap into existing relationships.
Mhoon has found great success from working with other businesses by implementing cost-cutting strategies for services.
"I have received free marketing through business-to-business partnerships. I have also received tremendous counsel and advice from experts related to my business," Mhoon says.
She was also able to use relationships to find low-cost labor via internship and work study programs.
Much like these businesses, your company can also be resourceful in finding ways to grow your bottom line without reducing your company's morale or money.
Read more articles on saving money.