7 Things Small Businesses Can Do To Cut Costs Now
Eighty percent of small businesses are feeling the effects of coronavirus, according to our Weekly Pulse Poll, and 37 percent have less than a month before they’re out of money. In other words, small businesses need to manage their existing resources as efficiently as possible until more help arrives (and it is coming!).
But as a small business owner, you already knew that, which leads us to the bigger issue: How do you hang onto the cash you have right now?
How to Cut Costs Fast, According to Financial Experts
Fortunately, we have a huge pool of financial experts, accountants, and advisors to help us answer that question. We connected with over 80 of those experts to find out how small businesses can cut expenses and keep their doors open.
Here’s their best advice on what to try today.
Review your finances in detail ASAP
Before you can cut business costs, you need to know what those costs are in the first place. And that starts with an in-depth dive into your monthly expenses. “Now is the time to do a very serious financial checkup,” says Sheraline Thomas from Calculated Books, LLC.
Sit down and run through every single line item, so you can “plug the leaks in your business right now,” says Teresa Oliver of Millenial Bookkeeping & Advisory Services.
“You need to burn the midnight oil for a few nights, comb through every single expense line, and dig into the details. Knowing your break-even will give you insight on how much you can afford to lose before the dam starts to give way,” she says.
After you do so, project your revenue and expenses for the coming months to get an accurate picture of where to cut costs. Your bookkeeper or accountant can help with this.
Reach out to your vendors and discontinue autopay
Take a hard look at the services you pay for regularly and consider whether they are critical or not. If they are, reach out to those vendors to ask about options for reducing costs, delaying payments, or requesting forbearance.
“First things first, identify your liabilities,” says Steven Edisis from Dynamic Capital. “Call anyone that you pay on a monthly, weekly, and daily basis and request a forbearance. If they cooperate, great, if not, stop the autopay immediately.”
At the very least, consider switching from an autopay subscription to a month-by-month option, which can reduce your short-term cost and commitment.
Talk to your landlords or mortgage providers
Aside from reaching out to your vendors, think about the bigger expenses too, like your rent or mortgage. Many companies are willing to work with small businesses because they know this is a trying time. The caveat? They don’t know you’re struggling if you don’t communicate.
If you’ve had to close down your business during the outbreak, this communication is especially critical. To start the conversation, try this simple template from accountant Lis Lee from Lis Lee Accounting:
Hello [vendor name],
We are writing to all [your company name] [vendors, lenders, property managers, etc] to let them know that we were forced to temporarily close our doors earlier this week due to the COVID-19 pandemic. As you are aware, this situation is definitely placing a strain on many small businesses, including [your company name].
We are so appreciative of the partnership with [vendor name] and are reaching out to inquire as to what your company is doing at this time to work with your tenants? Are there any options to pause payments without penalty or any other ways you are working with [customers, tenants, borrowers] to help during these uncertain times?
Thank you and best regards,
[Your company name]
Consider switching service providers
Another way to cut costs is to switch service providers completely, as companies are reducing their rates to support small businesses during the outbreak.
Think about all aspects of your business when you consider making a switch, from debt to processing fees, suggests Nia Jackson-McClure from Transcend Commercial Capital.
“With rate reductions, this is a great time to reevaluate not only your current business debt, but also your payment processing fees. Can you reduce those costs 10-40 percent by switching? Now is an excellent time to check,” she says.
Related discussion: What cost-cutting steps are you taking in response to Covid-19 and the economic crisis?
Look at your product offering
If you’re offering more than one product or service, it’s time to evaluate them. Are they all making money? Are there costs associated with storing them? With shipping them?
Once you determine what offerings are making money and what ones aren’t, cut your losses. To reduce inventory, bundle it with other products or offer buy-one-get-one-free sales to eliminate any storage costs fast.
“For costs, it’s important to review how your business operates and to see if you can find any efficiencies to reduce your expenses. For example, end a product line because the margins are too low,” says David Wilhelm from Ledger Pros.
Try cost-cutting measures that save employees
Unfortunately, many small businesses that have employees are forced to let them go—nearly a third of 12,000 small businesses surveyed in our Weekly Pulse Poll reported eliminating positions as a cost-cutting measure. But this should be a last resort, especially with the launch of the stimulus package.
Instead, consider ways to cut employee costs without cutting the employees themselves. Some companies have taken pay cuts across the board to save jobs. “I'd first see if there is room for the owners to cut back on their salaries and try to keep their best employees,” says Cassandra Bartunek from Urban Ledger, Inc.
Another idea from expert Jorge Mora from KTimeHR—temporarily reduce benefits if you offer them.
“If you are currently offering a 401(k) company match, you might want to consider suspending the match. That should provide some relief. Plus, it's better than having to cut your workforce,” he says.
And get creative in how you save employees while reducing costs, suggests Harvard Business Review. Check with your full-time employees to see if they’re open to working part-time for now or reduce your workweek from five to four days.
Related content: How to help your employees adjust during coronavirus
Take advantage of tax delays if you know you’ll owe in
One way to reduce your costs is to delay filing, and hence paying, your taxes. The federal government in the US is delaying the filing date until July 15, 2020, and some states are following suit.
Check with your state to see if this is an option for you. It might help you keep more cash on hand in the short-term.
Take action and have hope
Ultimately, most of us will need to look to alternate funding sources as the crisis drags on, and hey, that’s okay. Just know that relief is on the horizon.
In the meantime, try to keep as close of an eye on your expenses as possible, cut costs where you can, and stay hopeful that the small business community can recover and be stronger than ever. We’re with you every step of the way.
What creative strategies have you used to cut business costs during the coronavirus crisis? Share in the comments below.
Related content: For more ideas on how to manage your cashflow during the crisis, check out our Coronavirus Resource and Recovery Center.
Comments (1-10)
We are in Dry Cleaning industry In Irving, Texas since 1998 for almost 22 years.
Instead of layout our employees in the plant and front customers service area as we saw 50% decline during the first week of Coronavirus disaster, We brought down our production from 100% to 50% instead of everyday production we shift to alternate day.
Since we just ended our second week during the Coronavirus disaster and we still on decline almost 80% compaire to 50% in the first week, we shifted down our production from 50% to 20% instead of alternate day production we shifted to two days of production.
During our normal operation our business timing were 6:30 AM to 6:30 PM Monday through Friday
8:00 AM to 5:00 PM Saturday
Due to Coronavirus disaster we reduced our operatinal our to
9:00 AM to 7:00 PM Monday through Friday
9:00 AM to 5:00 PM Saturday.
By bringing these tactical operational changes we brought down our production costs(Salaries,Utilities)by shifting from 100% production to 20% production in our plant side.
By reducing our operation hours we brought down our operational expenses (Salaries,Utilities) instead of 12 hours operation a day and 72 hours operation a week, We having 10 hours of operation a day and 60 hours of operation a week.
This way so far we have all of our 100% employees Working but less hours for everybody as I told them that I can send 50% of our employees home and keep the other 50% working as we move forward with our operation or everybody can take a pay cut and all 100% can work and move forward.
As a two decade business owner and experience we will move forward on weekly basis analysis and we have to adjust our business operation and production accordingly but the Government has to come for the rescue fast because the small business industry Ship is sinking fast which in the long run will heart the Government income from our taxes as we the small business community are the 50% of the U.S economy.
Hoping and praying that "social distancing" is helping flatten the curve and that our courageous first responders and healthcare workers get the supplies needed for the fight.
As a small business, we cannot afford to lose a single day. Cost controls must be managed daily so that we do not prolong our recovery.
I appreciate the great advice and tips, but one thing is missing: Right now we work with some of the largest telecommunications service providers that are offering FREE internet communications (including phone service) to businesses with no obligation to continue after the 2 to 3 month free period (possibly longer). You don't even have to buy any equipment (phones) because you can use these features right on your computer, tablet, or smartphone. K-12 educators, healthcare workers, and nonprofits get video conferencing for up to 100 attendees, free nationwide long distance, team messaging, etc. Any business can get 2 months free with no obligation to keep the service. If you need to work from home, this is the perfect answer. If you are using a landline or on premise phone system, they will save you money after the free period anyway, and offer much more features. You can easily port your existing numbers if desired.
There is a lot of jobs that a single person can do that would keep some workforce employed if our governor would allow these jobs as long as social distancing and proper sanitation was adhered too
We immediately called every vendor and lender to let them know that no one is getting paid until we take care of our payroll. We have multiple vehicle loans and they were alll great. 90-120 day deferral with the missed payments tacked on the end. Our insurance carrier- also let us do the same thing. Landlord is letting us miss 2 rent payments and pay it back over 6 months with no interest starting in July. Credit cards said, no payment, interest or penalties for 30 days, call at the end if we need more time. Our business dropped in 1/2 but without the outflow of all the bills, payroll is manageable.
Be proactive and call to stop the outflow right away. Everyone is in the same boat and I let everyone know in no uncertain terms that we are in survival mode. The goal is to get through it. If we don't then their payments are a moot point.
We are an electrical and plumbing contractor. Hours have been cut due to the dramatic drop in call volume but our team is working together and hanging in until we can get them back up to full hours.
Jamie Hunley
It's important to find ways to keep our businesses running in this difficult time. Thank you Chelsey !
In this time, running your business IS NOT what you want to do. However, the problem is that we don't look for help until "after" the pain is applied. We talk to business owner starting February 1st, trying to avoid "China", but we got every form of blow-off. Now, I can not get to businesses fast enough. It breaks my heart to hear all the stories and, the life's work. But, you do not try to run your business at this time, WHY? One word - Liability! If some places you in the chain of infection, if you get infected, if your employee gets infected, if someone dies, if someone gets sick, or if someone gets hurt, you liable. Now, with the added stress everyone is under it just increases the odds. There is an answer, and one that does not need you to verify your income or cash flow...you don't have it right now. Also, many business owner where asking me for a business loan, but, needed it to cover personal expenses. Thus, we created a solution, and of course, my friends and family got to use it first, and now I am offering to help you, or maybe, you know a business owner that does not have enough in the bank. Now, before I give you the answer. Laying off employees at this time is not like laying them off "pre-corona". Why? Because they can not get evicted or foreclosed upon! In fact, there is a moratorium that would help them sue the lights out of someone, and hopefully that won't be you for making them stay at risk, at work? By helping others it has provided a means to do our best with getting through this time, and with 0% interest, up to $150,000, in the form of a personal credit line for 18 months, we hope to help you survive on! If you know of anyone that need financial resources Personal or Business, Please call me Direct, EL: xxx.xxx.xxxx. Legacysafegroup.com. All information is on our website in writing. 0% interest-No income verification, No taxes re'q, No collateral.
I moved the business to Panama City 2 years ago cleaning condos & houses was really profitable first we was hit with hurricane Michael and now we're hit with Coronavirus the beaches are closed so therefore no one can book to come in to the condos therefore work has basically shut down. It's really hard but staying healthy is more important.
This information was extremely helpful. Making some decisions will keep us from drowning.. Thank you for the time and energy invested in making this post.
We are a plumbing heating and air conditioning company with 10 service techs and 5 installers , to date our service call have come to a stand still and we are only going out on emergency calls ,no heat, no water , leaks causing damage and safety issues. This has us cutting service hrs drastically and we are only work out job sites with very small crews and no other sub contractors on site. At this time I’m working on rotation of crews keeping men working and trying to stay away from layoffs . We are working with local bank to see our options so we can keep pay role going. I have some men signing up for unemployment to help offset not work full weeks but really hoping they will all hang in there and we are making sure we provide full pay for the next few weeks.
Tim