How cost cutting can help small business owners stay afloat
COVID-19 has crushed the finances, and dreams, of small business owners across Australia, and experts say a renewed focus on cutting costs can help them recover when the pandemic ends.
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Sliding sales have been a painful part of the pandemic for business owners across Australia, and many are using cost cutting as a survival strategy.
An eagle eye on expenses is necessary for everyone from sole traders and microbusinesses to employers trying to keep teams of employees intact.
Fortunately there are plenty of opportunities to trim costs, business specialists say.
New research from Business Australia has found almost two-thirds of small businesses have experienced falling sales since February, while just 9 per cent have seen revenue rise.
Business Australia’s chief customer experience officer, Richard Spencer, says switching electricity and gas bills to a cheaper provider can deliver business owners average savings of more than $800 a year.
“Just going to the market and comparing what you are paying with what’s available can create instant savings,” he says.
“Electricity is critical to operating a business but you don’t see it or feel it.”
Spencer says business owners should go through every expense item they have.
“Every organisation will have costs they don’t need right now, and no business owners wants to spend money on things they don’t need,” he says.
Is internet still needed at the office? Can you save on storage space? Are you able to negotiate bill reductions or can debts be forgiven?
“Councils, state and federal governments have put unprecedented funding into small businesses in the last few months, but better business owners are not just relying on that – they are also taking a look at their own operations,” Spencer says.
Council of Small Business Organisations Australia CEO Peter Strong says staff cuts were the first step during the initial COVID-19 lockdowns and employee manoeuvres are continuing.
“Small businesses hate putting staff off, but casual staff were put off quickly,” he says.
“Now people are putting staff back on as part-timers. If they used to have five staff but only have work for two, they are giving all of those staff some hours.”
Strong says renegotiating rent can be “really hard” depending on the landlord but some have been wonderful to their business tenants during COVID-19.
“People have started to sell motor vehicles that they don’t need anymore,” he says.
“A business owner needs to look at their business plan. Ask ‘what costs have I got that I’m not getting a return on and how do I cut that?’”
Ian Whitworth, co-founder of corporate audiovisual firm Scene Change, says the business has suffered because “events are still effectively illegal” and he has tried hard to trim costs.
The firm pivoted to deliver virtual events, organised cheaper insurance because equipment is no longer on the road, retained all staff but switched them from full-time to three days a week, and contacted suppliers to renegotiate payments.
“While pivots are great, the reality is they will never get you back to your original revenue,” Whitworth says.
“We have called everyone who sends us a bill for anything and negotiated it.”
Whitworth says it’s good for business owners to start paying bills as soon as they can. “If you keep deferring payments for things like leases for much longer, you will end up with an insurmountable debt to pay back.”
CONSIDER CUTTING THESE EXPENSES
1 Check energy expenses and compare the deals available.
2 Businesses that migrated online can continue with environmentally-friendly paperless offices that reduce stationery costs.
3 Rents are a big business cost and there have been mixed responses from landlords, but it doesn’t hurt to ask for a rent reduction.
4 Insurance can be cut if you’re not using equipment for its intended purpose. A fleet sitting in a garage rather than on the road is a much lower insurance risk, and some insurers have offered discounts.
5 Can you sell assets you are no longer using and are unlikely to use in the future?
Originally published as How cost cutting can help small business owners stay afloat