The 'New Normal'. That's the phrase we're all hearing as we adjust to a fundamentally changed world. The economy is changing. But many small businesses are grappling with the consequences of subdued consumer confidence. And for many, this is having a profound impact on how businesses spend, staff, plan, market, operate and budget. In this article, we'll explore some useful, practical and easily applicable steps that may help you reframe your thinking in how to financially adjust and adapt as you move forward.
Having full visibility on what, where, when and why you spend is critical in identifying any opportunities you have in cutting back on the costs you can, so you avoid unnecessary cuts on those that don't. Simply gathering your current costs and performing a spend analysis – like those offered by Xero – can help reveal what you need to do now and set a baseline to measure and track success moving forward.
Now you've a better view on your spending, you'll be in a good position to see how and where you might be able to trim or save. To make that job a little easier, you may find it helpful to bucket your spend into these three areas:
These include things like rent or mortgage, utilities, insurance and banking, IT and technology systems, travel and memberships. For most businesses, it's these recurring expenses that can make the most difference to your bottom line. By reducing (or pausing) even just a few of these costs, you essentially make it cheaper to run your business.
Think food, uniforms, tools, team events and training. There are ways you can still keep these within your business mix but with a little creativity needn't be so expensive.
Any stock you own represents potential revenue. If sales are slow, it means stock will last longer. But there are other things you can still do to claw back on costs. You could consider consolidating storage space, reducing office supplies, or perhaps offering customers fewer but still in-demand options.
Taking a proactive approach now will help you emerge from the impact of COVID-19 stronger and better equipped to adapt and take advantage of the opportunities that will eventually emerge. And they will. But what it does in the present is help build business resilience and place a stronger focus on continued and sustainable cost savings, rather than unsustainable one-off cuts.
As the owner and operator of a small business, there's no doubt you feel the financial pressure first. But that doesn’t mean you need take on the burden of crisis management and costs alone.
“Authentic communication – with your people, your suppliers, your creditors – can reveal solutions and ways forward you may not have thought of on your own.”
As will flexing your network and reaching out to trusted advisors and family members. But perhaps even more importantly is your responsibility to yourself. Be sure to make your own mental health and physical wellbeing a priority. It really is okay to seek help if you need it.