2020 has hit businesses hard so far: the Dow, Nasdaq, and S&P 500 have all lost at least one quarter of their value since February. As more and more companies either close up shop or move online, the need to tighten budgets is greater than ever.
Budget leaks are problems for companies at every stage of the business cycle, but the spectre of a recession makes them particularly vicious. Laying off employees or closing key operations should be the last resort, so it’s important that every other possible option is considered first.
If you’re looking to lock down your budget without harming the soul of your company, start with these five options:
These uncertain times have thrown the world of procurement into a tailspin, with the price markups for key medical equipment hitting exorbitant levels in record time. No business can afford to deal with excessive cost increases, but the options for small businesses are particularly slim.
One potential option is to join a group purchasing organization, or GPO. GPOs leverage the buying power of their numerous members to secure affordable prices and reasonable distribution speed. As the procurement world becomes increasingly dog-eat-dog, being part of an organization that looks out for its members may be just what a business needs. By lowering prices and distribution costs, GPOs empower businesses to operate smoothly, even in tough times.
As businesses start to fire and hire employees at unprecedented rates, it’s important to keep the cost of employee turnover in mind. It can cost up to 33% of an employee’s annual salary to replace her - money that most businesses simply can’t afford in times like this. Even so, employee replacement can sometimes be unavoidable, forcing businesses to find ways to keep their onboarding costs at a minimum.
If employee retention is an option, take it: Retraining and professional development will almost always cost less than hiring a completely new worker.
One increasingly popular option is to replace departing employees with freelancers. Experienced freelancers will likely need less training than a new hire; they also don’t require expensive investments like health insurance or a 401(k).
When times get tough, marketing budgets are almost always the first to get slashed. While this might make sense in theory, the real-world implications aren’t so clear-cut. Research published in Harvard Business Review shows that, in recessions, marketing can actually be particularly effective, as consumers are more likely than ever to change their purchasing habits.
[bctt tweet="The budget leaks for businesses isn’t marketing - it’s bad marketing." username="relevance"]
Make sure your marketing appeals directly to what’s on consumer’s minds. In 2020, you want to ensure that any advertising you invest in works for people who are affected both by COVID-19 and by recent economic fluctuations. Marketing that works pays for itself, turning a budget leak into a potential opportunity for new customers.
When we talk about canceling unused subscriptions, we usually think about it in terms of the consumer: Netflix, Apple+, FreshDirect. While the average consumer indeed wastes around $500 per year on unused subscriptions, that number can be significantly larger for lots of businesses.
Plenty of companies subscribe to communication services and project management software that have serious overlaps in their capabilities. Try to find platforms that incorporate all of the elements you need before axing the ones you currently use. If your business is one that’s using mostly remote workers at the moment, use this as an opportunity to see exactly which capabilities your project management platform needs as you prepare to invest in a new one.
It can be easy to ignore, but office expenses can add up significantly over time. Companies can spend nearly $2,000 on each employee’s office supplies annually, and that’s not even incorporating expenses like rent, climate control, and electricity.
Businesses that have switched to more telecommuting-intensive models might want to consider the benefits of maintaining these models over the long term. Even if you still maintain an office, increasing the proportion of your workforce that stays home can allow you to move into a smaller and cheaper space. Alternatively, a smaller in-office team could allow you to sublet other portions of your office to freelancers or small businesses. At any rate, use this opportunity to see how well different aspects of your business function remotely, and work from there.
Slashing the budget is never easy - every expense seems essential until it’s gone. If you’re hoping to survive and thrive this year, you need to run a tight ship; these are five places to consider in order to prepare your company for what’s to come. The more leaks you plug now, the more success you’ll find later.
