5 steps to Cutting Costs in a Soft Economy
Local economists and business industry leaders are advising companies across the state to tighten their financial belts for an economic downturn that could last through 2009. According to the Small Business Administration, efficiency is the name of the game when streamlining expenses.
- Look at your overhead and trim where you can Find opportunities to streamline internal processes to cut down on waste. Look at your regular ongoing expenses and evaluate where you might cut costs (reviewing utility usage, changing hours of operation based on your peak sales periods, evaluating staffing schedules, etc.). But be careful not to shoot yourself in the foot with the simple and obvious layoffs and staffing reductions — taking care of your customers is still the top priority.
- Evaluate contracts and pricing with vendors They want to keep your business and may be facing the same challenges that you are. Discuss shaving some of your costs or extending other payment considerations, such as longer terms without service fees or interest. Don’t commit to or extend contractual agreements that have increasing costs built in. Also, discuss renegotiating contracts to adjust to the current economic conditions.
- Sharpen inventory management Identify your top-selling products and be sure to have them in stock so you can offer them in a timely manner. Phase out items that are not ringing up sales. To avoid overstocking items that only sit on the shelf, monitor ordering procedures more closely and talk with your sales people regarding customer response and feedback.
- Talk with your accountant or tax-planning professional Identify potential savings through credits or rebates. Look into the 2008 Economic Stimulus Package benefits for small businesses (www.sba.gov). With the expanded deductions, a business owner may save money by implementing upgrades or expansion measures this year. Improving efficiencies, such as purchasing energy-saving equipment, may reduce your tax bill in 2008 and 2009.
- Pool expenses for marketing or promotions Many businesses offer products or services that complement those of another business. So, a catering company could partner with a party supply store for marketing purposes. Collaborate with other small businesses in your area on an advertising coupon or discount package. Finding partners to participate in a direct-mail campaign can also cut costs.