Small Business Survival Strategies: Extreme Cost Cutting
For struggling businesses, survival often means cutting expenses and embracing the new normal of existence on a shoestring budget. If you’re a business owner who’s facing tough times, you know all about the typical saving strategies like bartering or trading services, buying used, and subleasing or sharing extra office space.
But sometimes these classic cost cutting measures don’t go far enough. In a tight economy, the difference between winning and losing often depends on our willingness to go extreme. Here are few ways to take even more fat off an already lean budget.
Who Needs an Office?
Depending on the nature and size of your business, consider getting rid of your office completely. Rent is often an inordinately larger expense and in our virtual world much of the mechanics of business operations happens online anyway. Think about letting your staff work remotely and just rotate company meetings in coffee shops, living rooms or online. Besides rent, going remote can reduce travel expense, utilities and insurance costs.
As our businesses mature, we tend to forget the hunger and creative thinking that inspired and drove us in the early days. Remember when you advertised anywhere that was free? Remember brainstorming new ways to market your product or service that seemed outlandish at the time? Think like a startup again—what methods of guerilla marketing can you resurrect? What piece of your business is waiting for an infusion of that high-impact, low-budget creativity from your startup days?
Liquidation is a charged word; it brings to mind the last gasp of a dying business. But not only can liquidating be liberating—it can be good for business. Do you have old stock that’s taking up valuable real-estate when it could be sold for a few extra bucks? Take a critical look around—what office equipment isn’t being used or isn’t essential to your business? When it comes to running lean and mean, less is more.
Whether you’re sending promotions via e-mail or snail mail, cut the dead weight. Non-responders take up valuable time and money. Purge inactive or marginal prospects from your lists and focus instead on solid leads and active (or recently active) customers.
Rethink Profit Margin
A few months ago, my online resale business was slowing down to a crawl. Since the wholesale price of my products was fairly constant and sales had been strong in the past, I decided to go extreme. I marked down all current and future inventories to one flat price (which was significantly lower than the competition). Instead of listing each item in the $20-$28 range, I slashed the price of everything to $14 and watched my sales come back. Granted, I settled for less profit, but I moved product, kept the cash coming in, and word spread about my flat pricing structure. This approach might not work for everyone, but it’s worth considering, especially if you need to kick-start cash flow.
From the price of coffee filters to cell phone plans, take a critical look at every dollar going out the door. Challenging economic times can create opportunities to recalibrate your business overhead and save cash. Ask yourself, what services can I consolidate? What can I do without temporarily? What contracts are coming up for renewal that can be renegotiated with more favorable terms?
Whether your business just needs a belt tightening, or you’re on the brink of losing your shirt, extreme savings strategies can work. Don’t be afraid to get creative and look at all the ways to cut your business budget. If you’re uncomfortable with an option or hesitant about a particular strategy, just remind yourself that nothing has to be permanent. Sometimes successfully navigating a business through lean times can help us appreciate and enjoy the boom periods even more.
What extreme or unexpected costs cutting moves have you made?
Kentin Waits is a freelance writer and marketing specialist based in Portland, Oregon. His work has been featured in US Airways magazine and top-rated blogs such as Wise Bread, the Consumerist and MSN SmartMoney. When he's not writing, Kentin runs a small online antiques business.