Growing a business is hard work, particularly during a challenging economic environment. Recessions can hurt any business in the country, but smaller ones are more likely to suffer, because the majority enjoy less of a financial cushion, market power and leverage within their industry to weather through tough times.
All of this is to say that all business owners need to start preparing right away (if they haven’t done so already) for the tough times ahead. A recession is more than just a headline buzzword for journalists and economists.
Here are a few ways you can make savings during a recession.
Asses your finances honestly
Surgically trimming your business budget is the obvious place to start. The challenge is to be smart about where to cut spending.
Oddly enough, however, cutting back is easier to do during a downturn than during prosperous times, as tough times provide an imperative to change. When survival is the goal, it’s easier to make the tough choices. Managers can defy old mindsets and creatively search for solutions, not just the next lifeline.
The challenge is to make your decisions well-defended and evidenced. To make sure they are, review your budget with key members of your financial team, advisers and accountants to get the insight you need to make the right decisions.
A lot of businesses are and will continue to struggle because of rising energy costs. As well as government help, businesses can also look to reduce costs in the ‘normal’ ways – use energy efficient lighting; turn down the heat; turn things off when not in use; be careful with kitchen etiquette (overfilling the kettle costs the UK £68 million a year in energy costs!); use energy efficient tech; avoid energy waste, go paperless and so on.
If you are still worried about paying your business energy bills, contact your supplier, as they may be able to work with you to agree on a payment you can more easily afford. It’s always worth asking if in doubt.
Employees are essential to getting work done. For a lot of business owners, nothing could be done without them. Employment costs can be expensive but the solution isn’t always to cancel your new hire.
Instead, you can keep your number of full-time hires down by outsourcing certain tasks to third parties. A popular function to outsource is payroll – you need to get it done, but you’ll probably find you can save more by outsourcing it than hiring a specialist.
Another way to save on employment costs is start with employee expenses, not employees themselves. You can make savings by ending or reducing the frequency of any free lunches you provide or toning down the Christmas party.
Embrace remote working
After the pandemic, a lot of employers were probably happy to see their staff return to the office, but that fondness doesn’t make it any less expensive than remote working. When there are employees in the office, all those energy costs we’ve talked about are out in force, so you might want to reconsider your policy.
We’re not suggesting you go back to remote working completely, but reevaluate how your working week goes. For instance, is there a day where only one or two employees come into the office, unnecessarily racking up your lighting costs? If so, consider closing the office permanently for that day.
When it comes to remote working, always remember that employees have been proven to be happier and more productive without the watchful eye of their employer.
Negotiate with suppliers
Like your energy costs, what or how you pay your suppliers doesn’t have to be set in stone forever. Ultimately, they want to stay in business too and might be struggling. Furthermore, your payments are their income, and they want to keep that coming in, if you’re reasonable.
A great way to get a better deal is to buy in bulk. Suppliers, eager to move their stock and keep a positive cashflow, might just agree to a discount for a particularly big order of supplies. You might be surprised as to what you get and you certainly won’t lose anything by trying.
What do you think of our list? Do you have any tips for saving during economic difficulties? We’d love to hear your thoughts over on our LinkedIn page!