The immense economic pressure created by the COVID-19 pandemic has forced businesses great and small to find ways to cut their costs in reaction to and anticipation of increased financial strain. The Great Recession showed us that even large companies like Lehman Brothers and General Motors aren’t immune to the effects of an economic downturn. Leaning on these recent historical lessons, wise business owners have already begun the process of avoiding heading down the same road in the weeks and months ahead.
If you’re concerned about keeping your business afloat, especially if the coronavirus sparks another recession, it’s wise to start making an effort now. Here are three ways to cut your operating costs, lower your overhead, and help your enterprise survive and thrive in what is rapidly becoming the new normal.
1. Reduce Your Operating Expenses
Businesses incur a variety of different operating expenses at any given moment, all of which can add up quickly. They need technological tools such as computers and phones, SaaS subscriptions, internet service, and even basic office supply products like pens and paper.
If you’re looking for ways to reduce your costs, one of the easiest areas to trim is your overhead expenses. Fortunately, you don’t need to turn down the thermostat or get rid of the coffee pod machine in order to cut costs. All you need to do is join a group purchasing organization (GPO) to keep your supplies flowing in at a fraction of the current cost.
By joining a GPO, you tap into “bulk pricing” for an endless quantity of office supplies without needing to increase your purchasing quantities. The only catch is that you give up the ability to choose your own 3rd party supplier.
By becoming a member of a GPO, you agree to purchase goods and services from select suppliers at a substantially discounted rate.
Much like a warehouse club, many GPOs come with membership fees in order to pay for their own overhead. However, you can also avoid these extra fees by looking for specific GPOs that pass the administrative expenses onto the group’s suppliers.
2. Eliminate Your Office Entirely
COVID-19 pushed numerous businesses into the remote work world. Some were already acclimated to a work from home atmosphere, making the shift to 100% remote fairly painless and straightforward. Other companies that had eschewed the remote work option in the past found the nearly-instant transition much more complex and difficult.
Whether already established or completely new to the work from home setting, though, many companies have found that a fully remote office isn’t just an adequate alternative to the traditional option. It’s actually preferable. The social media giant Twitter was one of the first companies to come to this realization, declaring that they would allow their employees to work from home in perpetuity. The reason? Remote work had proven to be a resounding success.
On the one hand, employees appreciated the flexibility, lack of commute, and ability to tend to personal responsibilities. On the other hand, Twitter executives saw the enormous potential savings that could be realized if they didn’t have to pay for expensive long-term leases for physical office spaces.
Regardless of your company’s specific situation, it’s worth evaluating your remote work options — not just as a response to a pandemic, but as a long-term cost-cutting solution. Even if only a portion of your workforce has the ability to work from home, allowing them to do so can, at the least, reduce your overall office space, utility bills, and office supply consumption.
3. Internalize Your Growth
Many companies invest large amounts of money into professional development. This can be provided through seminars, courses, and events, all of which can come with significant expenses. Nevertheless, maintaining a growth mindset is an essential part of 21st-century business success, and your business’s investment in continual learning for your staff shouldn’t be slashed in the name of saving money.
Fortunately, there is a way to pivot your strategy in order to maintain a focus on professional growth and still cut costs: internalize it. Rather than outsourcing your development, cultivate channels of learning within your organization. Create blocks of time for your employees to engage in peer learning that encourages your employees to learn skills from one another.
Former LinkedIn CLO Kelly Palmer and Imperative founder Aaron Hurst took this idea of peer-to-peer education even further by pioneering the concept of peer coaching. This focuses on pairing coworkers together to help them assess their professional goals and keep each other accountable as they work towards their professional development side by side.
Regardless of the specific manner that your internalized growth takes, it remains a viable way to save money in a recession without hurting your company. By drawing on your domestic ability to educate your staff, you maintain a growth-mindset for your workspace while simultaneously eliminating the need to invest large sums of money into professional training and development.
Costs That Shouldn’t Be Cut
Remote work, GPOs, and internalized growth can all help to reduce expenses. However, there are some often-tempting cost-cutting options that experienced professionals routinely recommend should be studiously avoided. For example:
- While cutting small costs across the board is okay, slashing a specific department’s budget can seriously hamper your company’s long-term vision.
- HR and management should continue to operate as comprehensively as possible without cost restrictions as they smooth communication, ensure that goals remain in place, and conduct performance evaluations.
- While excess technology can be reduced, the quality of important tech, such as an e-commerce store, shouldn’t be compromised in the name of saving your budget.
When considering cost-cutting activities, it’s essential that you preserve your long-term strategy, maintain your quality of service, and uphold internal systems and communication. These are all instrumental and will absolutely still need to be in place when the troubled economy recovers.
If you’re looking for ways to cut costs throughout a recession, it’s important that you maintain an innovative mindset. Simply slashing budgets and crippling your company’s ability to function neglects the future in favor of the present. Instead, look for practicable ways to preserve your cash, such as becoming a member of a GPO, eliminating your physical office, and internalizing your professional development.
By aiming for less destructive money-saving activities, you can protect your operation’s internal structure and still reduce your expenses, setting your company up to both survive in the present and thrive in the future.