Reevaluating Your Expenses: A Guide to Help Small Businesses Save
Uncertain times lead to expense concerns. This is common for small businesses.
As many local businesses look to navigate the COVID-19 pandemic, many are wondering if they need to adjust their expenditures and what they can do to save. For some, it’s not if, it’s how soon they can make drastic spending changes.
The last week of March saw 24% of small businesses temporarily shut their doors. Since then, many businesses have had to face intermittent streams of income, and hard truths.
While small business loans and federal grants have provided a lifeline to many operations, it may not be enough for some. Tightening purse strings might be imperative to keeping businesses afloat. Here’s how to tell if your business needs to reevaluate expenses and how to save.
Time to Take Stock
Before you can identify how to save money for your small business, it’s essential to evaluate your business expenses as a whole. That way, you can identify where you’re overspending and where you could be saving.
Here’s what to look for:
Cash Flow Problems?
It seems like a simple question, but you might need to do some soul-searching to be honest with yourself about whether or not your business is having cash flow problems. Chances are if the COVID-19 pandemic shut your small business down for any amount of time, your cash reserves may be low or depleted. Ask yourself how many months you can sustain with your current cash flow. Small business advice usually suggests having 3-6 months of runway.
Expense Struggle
If you’re struggling to meet your basic expenses, like rent or utilities, it’s time to reevaluate your costs ASAP. CPA Practice Advisor says these might be signs that you need to make some changes:
- Trouble paying taxes
- Deteriorating assets (for example, overlooked storefront maintenance or outdated equipment)
- Overdrafts
- Creditor problems
- Bounced checks
- Customer complaints
Check the Severity of the Issues
The truth is, every business will likely encounter one of the above in its lifetime. Financial crunches are usually part and parcel of running a business. It’s the severity of those struggles you need to watch out for.
For many small businesses, the pandemic has only compounded problems. If your small business is in a desperate position, it might be time to look into city or state grants, industry-specific, or minority-specific grants.
How are these categories different?
- City or State Grants – A city or state grant is a financial reward administered through a local municipality. It’s direct monetary assistance given to an organization.
- Industry-Specific Grants – These are grants given by one organization to a specific industry organization. For instance, Beauty Changes Lives, a foundation that promotes careers in the beauty industry, has offered grants to beauty professionals out of work due to COVID-19.
- Minority-Specific Grants – These grants are designed to support those relating to a particular minority, for instance, women-owned businesses or Latinx-owned businesses.
Check out our article, “Small Business Grants: What Are They and How to Apply” for more information on obtaining a grant today.
How to Save: 13 Quick Tips
Not ready to apply for grants, but looking to cut costs? If you’ve identified from the list above that you need to make some changes, here are some tips to start saving.
#1 Negotiate with Vendors
If your inventory is out of line with your needs, it’s time to talk with your vendors. Quickbooks says that taking the time to discuss your costs with vendors could produce a pretty payout that decreases expenses while allowing you to bring in more profit.
#2 Cut Unnecessary Expenses
Providing employees with lunch may be a great morale booster, but tough times call for tough measures. Find line items that can go—like that catered lunch—and remind yourself that cutting the fat is better than laying people off.
#3 Set a Budget and Review it Regularly
It sounds like business 101, but amid the busy workweek, it’s easy to overlook the need to assess and review your budget constantly. Taking the time to do so, Bplans says, will give you greater insight into your business and how it's doing.
#4 Invest in Technology
Invest? Isn’t that the opposite of saving? Not when you’re playing the long game. With the speed at which technology changes, no small business can afford to get behind. That’s why it’s critical you make updates frequently.
Do you use eCommerce to sell products or services online? If so, ensure you have the most up-to-date sales platform to streamline sales from the Home Page to Checkout.
Or, do you have trouble keeping track of company expenses? Automated finance and expense reporting software can do the work for you, reporting where expense concerns can be found.
#5 Embrace Telecommuting if You Can
The days of keeping an entire staff onsite are gone. More and more businesses are finding ways to make telecommuting work and reaping the savings benefits. Think about it. What’s the biggest line item on your budget? Surely rent is near the top.
With telecommuting, less onsite space is needed, which provides considerable savings if you can downsize your space and reduce your utilities.
That’s great, but what if you can’t telecommute?
Some businesses, like restaurants or salons, can’t afford to telecommute. Chefs can’t exactly cook from home, and guiding a customer through a haircut will lead to some awkward hairdos. For these businesses, it’s important to get creative. Instead of asking, “How can I telecommute?” ask yourself, “How can I optimize my property?”
- If you’re struggling with reduced capacity limits, create a comfortable waiting room outside your business and use the waiting area inside as another workspace.
- Restaurants can turn their parking lots into more outdoor dining space, or use the space to create a curbside pickup window.
#6 Invest in Interns
Finding good talent is not just a struggle, it’s a cost, especially to small businesses who have to invest a lot of time and resources into training new staff. But small businesses can take the same approach many huge corporations do in using interns by hiring smart, inexperienced talent and training them for hire.
Remember, free labor is not the goal. You need to pay your interns to reap the full rewards.
NACE’s 2012 Student Survey showed that approximately 60% of college graduates in 2012 who completed a paid internship received at least one job offer. You can take advantage of this talent pool.
#7 Consider Outsourcing
Consider outsourcing simple jobs that can be contracted out for minimal costs to the business.
Do you normally spend hours on graphic design for promotional content instead of generating new leads for your business? Need a helping hand with your website design? Sites like Upwork and Fiverr offer great resources to find and hire outsources to free up your time.
#8 Minimize Maintenance Costs
Having a cleaning staff may be necessary to keep your business in tip-top shape during normal times, but consider cutting back on frequency by having employees, say, carry their own trash out. Or, ask staff to rotate on kitchen duties.
#9 Use the Cloud
The beauty of technology’s swift evolution is there are greater resources at a small business owner’s disposal. For instance, chunky hardware can often be traded up for cloud-based software that’s usually more affordable and doesn’t take up nearly as much space.
#10 Go Paperless
To that end, nixing paper usage will also save money. Think of all the banks that offer perks to those who go paperless. They see the cost-savings. And you can, too, by offering emailed receipts and cutting back on in-office paper usage.
#11 Buy in Bulk
The biggest reason to buy in bulk? You can pass on the savings to your clients. That’s according to Gibbs & Ball, a U.K. based storage and transportation company. “By passing on the savings you have made from your bulk buy, you can attract more customers, meaning you have more sales,” the company reports. Can’t argue with that.
#12 Go Green
Not only is going green a great promotional tool that could win you new socially conscious clients, but it can also save you money. Simple changes, like turning off the lights in conference rooms when not in use or printing double-sided, will actually cost less.
#13 Cut Traditional Advertising, Invest in Modern Marketing
Big print pieces or newspaper ads may look great, but if they’re pushing your budget to the limits, American Express’s Saving Money column suggests small businesses shift that cash to low-cost alternatives.
What are those alternatives?
- Nextdoor
- Search Engine Optimization (SEO)
- E-newsletters
- Social media
DIY Promotion
So how do you use the tools above to do your marketing and promotion to save money? Let’s look at each option:
- Nextdoor – Businesses should focus on where the majority of their customers are, and that’s why Nextdoor is a business boon. Nextdoor is the neighborhood hub, where neighbors go to discuss and share recommendations for all things local. Those on Nextdoor are likely the same people who create the foot traffic in your store. Best of all? Creating a Business Page is free.
- Search Engine Optimization – SEO is a long-term marketing strategy. By investing a little upfront and updating your website in order to better rank with search engines, you can gain more virtual foot traffic over a span of months.
- E-newsletters – An e-newsletter is an email marketing strategy that helps you stay in touch with the customers who are on your mailing list. Use these to update customers and share something valuable or unique. Whatever you do, always try to avoid becoming spam in their inbox folder.
- Social media – By establishing yourself on the major platforms that you know your customers use, you can begin promoting your business. It does require a lot of time, however, and getting instant results costs money. Social media platforms can positively impact your business, however, you must understand how to leverage social media while reopening your business to reap the best benefits.
Focus on Those Who Matter Most
When it comes to your customer base, the local population is your greatest asset. And with a neighborhood app like Nextdoor, you can focus on those who matter most: your neighbors. As a business tool, Nextdoor gives companies a place to:
- Run promotions
- Engage with clients
- Build brand awareness
- Show up in local search results as soon as you receive one recommendation
To get started, simply create a free Nextdoor Business Page, then customize it to promote your small business and share your story. Continue reading “Video Tutorial: How to Navigate Your Business Page in the Nextdoor App” to find out how to engage with your community. The best option for local promotion, small businesses can trust the neighborhood hub because it’s filled with authenticated members—none of that fake account business.
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Additional sources:
U.S. Chamber of Commerce. Special Report on Coronavirus and Small Business. https://www.uschamber.com/report/special-report-coronavirus-and-small-business
Money Under 30. How Small Businesses Are Handling the Coronavirus Pandemic. www.moneyunder30.com/how-small-businesses-are-handling-the-coronavirus-pandemic/
CPA Practice Advisor. 10 Signs a Small Business is Struggling Financially. www.cpapracticeadvisor.com/small-business/news/12302381/10-signs-a-small-business-is-struggling-financially
Inc. Small Business Grants for Companies Hit by COVID-19. www.inc.com/gabrielle-bienasz/small-business-grants-2020.html
Beauty Changes Lives. Relief Grants. beautychangeslives.org/beautyreliefgrants/
Quickbooks. 7 Tips for Negotiating the Best Deal with Your Suppliers. https://quickbooks.intuit.com/r/business-development/7-tips-for-negotiating-the-best-deal-with-your-suppliers/
BPlans. 30 Cost Cutting Tips for Small Businesses and Startups. https://articles.bplans.com/money-saving-tips-business/
The Balance Careers. The Value of Offering Paid Internships. https://www.thebalancecareers.com/the-golden-age-of-internships-1987140
Gibbs & Ball. The Advantages of Buying in Bulk for Your Business. http://www.gibbsandball.co.uk/the-advantages-of-buying-in-bulk-for-your-business
Claim your free Business Page to get started on Nextdoor. For resources on how to use Nextdoor to stay connected with your local customers, pertinent news affecting businesses, and more, follow us at @nextdoorbusiness on Facebook.
