When times get tough, it’s tempting to cut corners and lay off employees. While you may have to cut costs, here’s what you need to focus on to keep your ship afloat.
Establish a Cash Reserve
You should have a cash reserve for tough economic times. If you’re doing well now, now is the time to start that cash reserve. Try to save up at least 6 months of business expenses – ideally, you should have a year or more saved up. That way, you can weather an entire year of slow business. If you can’t recover after a year, your business is probably permanently sunk.
Don’t Cut Marketing
Never cut marketing. A lot of businesses make this mistake. If you cut into your marketing expenses, how do you expect to recover your revenue? You can’t. Always beef up your marketing by as much as you can comfortably afford. When you have to make cuts elsewhere, make sure that money goes right back into marketing.
If you have a cash reserve, place extra emphasis on marketing. Make sure this gets funded first. It’s the engine that drives revenue.
Borrow Money
When you’re down to the last dollar in your bank account, and you’re looking for money, you may need to take out a loan. Of course, a bank will want to know that you can afford to repay it, so you will have to rely on outstanding invoices or the general strength of your company.
If you’ve hit a slow quarter, but you know you’ll bounce back, an equipment financing bad credit solutions from companies like BCBL might just be what your company needs to tide you over.
Start Looking At Ways To Cut
Start sweating the small stuff. You can make a lot of little cuts like company perks, the morning coffee, and paid lunches. But, you can also institute a 4-day workweek if you really need to cut expenses and save money. While this might put some employees in a tough spot financially, you should make it clear that the only other option is to lay them off.
If employees need financial assistance, offer to help them find part time work and work with them so that they can stay employed with you. Assure them that this is a temporary issue and that they’ll be back to work.
Finally, look at benefits that you cannot afford to pay and see if you can cut them. You may need to cut back on your 401(k) match, for example, or year-end bonus. It’s not going to be a popular decision, but it might be necessary.
Never Skimp On Quality
This is where a lot of business take a wrong turn. They believe that, in order to make up for lost business, they have to cut quality and keep prices high. Wrong. This is only going to put you into a price/quality death spiral.
In order to maintain your premium prices, you have to increase quality, not decrease it. So, what will happen is you will lose customers, which will force you to cut quality even more, resulting in further customer/revenue losses. Eventually, you’ll be out of business.
Never skimp on quality. Never.
David J. Norris has been a small business advisor for over 10 years now. An avid writer, he enjoys sharing what he finds online. His articles appear mainly on small business and finance blogs.
