The challenges that 2020 brought came quickly with high impact for many businesses. Though the Paycheck Protection Program assisted many, it was not a long-term strategy for some industries hit especially hard. Even if your business was not devastated, it’s a good time to evaluate your company’s financial strategy, budget, and cost-saving measures going into a new year. How can you operate more efficiently in case additional surprises arise or the economy doesn’t bounce back quickly? In good or bad times, the following strategies may help your business become more profitable and put you in a better position to weather the storm.
1. Strategic Alliances…with Competitors
We’re always looking for ways to beat the competition. We do a SWOT analysis and study what they do to exploit their weakness and win clients away. Sometimes businesses end up doing things better, and sometimes worse.
It may make sense to make certain competitors your friends. Study their competencies, strengths and weaknesses. Are there ways you can partner to help both sides profit? If you complement each other, it also makes it less likely your competitor will try to undermine you by prospecting your clients, etc. Some of my clients have learned their best customers are likely competitors that refer business once they uncover each other’s synergies. They key is finding out how to complement each other, and working with companies that appreciate relationships and share your same goal.
2. Hire Interns
At times, you may find yourself exceptionally busy. You have ideas for how things could be done more efficiently, but it would require completion of a few projects and dedicated effort to get it accomplished. Hiring a temporary, part- or full-time employee can reduce your bottom-line, especially if it’s impermanent work that is needed. Evaluate your business goals for the year and see what items could be completed by an intern looking to gain experience. Many times, interns are willing to even work for free in exchange for the experience on their resume. They will need to be trained and some-time dedicated to their development, but depending on your needs and workload, could be extremely additive to the business.
3. Take Advantage of Timely Payments and Discounts
Staying on top of your accounts payable can save you money in the long run. May vendors offer discounts to clients who pay within a certain period of time. It also helps build your relationship and be seen as a valued client in their eyes. If no discount currently exists, ask your vendors if you can pay them early and receive a discount. They may be willing to negotiate. Also, don’t always take the sticker price when it comes to commodities like paper, ink, and other office supplies. Get a number of quotes and don’t stop there—ask for what you could save if you implemented repeat or auto orders, or if they were your sole provider.
4. Manage your Time Wisely
We’ve all heard the expression, “time is money”, and it couldn’t be more accurate when it comes to your business. If your employees are bogged down with inefficient software to perform tasks, you’ll be paying more for simple things to be completed and could lose out on potential sales waiting for technology to cooperate. You don’t need to have the most expensive software in the world. However, you should have some key criteria you use for your systems. How long does it take my system to boot up? Does it run smoothly (not shut down and restart periodically)? What level of maintenance do I receive and how quickly does support respond? Are things intuitive and easy to remember when using the technology? Good people make your business better, but without the tools to work quickly and efficiently, their talent won’t be maximized, and you’ll be paying more than you need over the long-run.
5. Reduce Inventory
In many industries, excessive inventory can become an expensive problem. In industries where product can become obsolete if maintained too long, businesses should be looking for ways to sell off items before it decreases in value. Requiring too much space can also hurt the bottom line. Lower inventory levels that allow for lesser warehouse space can reduce monthly rent substantially. Finding alternative ways to store some inventory, particularly pay-as-you-go solutions, may also be the answer you need.
6. Manage Employee Spending
It’s easy to quickly sign off on expense reports without much thought. The day is busy, you want your sales and office staff to feel you trust them, and you don’t have time to dig through every detail. There are some tools you can use to help you monitor activity without disrupting a credulous culture. Get a credit card where you can set up limits and segregate expenses to various GL’s. Set flags on certain items that you’d like to review if they don’t meet certain criteria. Require supporting documents tied to business activities in an electronic platform that can be archived and reviewed. Regularly remind employees of procedures for expensing items and provide examples of what is acceptable and what is not.
7. Work from Home
Consider letting certain employees work from home. Evaluate how utility costs drop and find ways for the situation to work so employees are productive. Have regular touch-bases including video chats and phone calls. You may be able to downsize your entire office space and save on rent, maintenance, and all of the expenses that come with office space your really don’t need.
Being a solid, viable business means continuously evaluating ways to save money and maximize profitability. Sometimes that answer is right in front of you. You don’t necessarily have to overhaul your everything, but a few simple changes can make all the difference and help your company thrive for years to come.
Melinda M. Toy, CTP