An increase in expenses followed by a decrease in income calls for a serious cost reduction.
When people say ‘unforeseen circumstances,’ nobody ever imagined an unforeseen circumstance would be as huge as the Covid-19 pandemic. The pandemic brought with it, a lot of unimaginable and unexpected changes, especially to the economy; the Covid-19 pandemic has had a great toll on the world’s economy. While some industries like the; gaming, media, and healthcare industries are thriving during the Covid-19 pandemic, some companies are experiencing a huge decline that would make them resort to cutting cost.
An increase in expenses followed by a decrease in income, calls for a serious cost reduction. Companies that want to stay in business and want to have saved enough for post-pandemic have to strategically cut costs. It is not as easy as it sounds because cutting costs means stepping on some toes but it is the most logical thing for all businesses to do.
Below are some ways you can cut costs amidst the pandemic:
Get cost-cutting ideas from your employees
The first and most important thing to do is get ideas from your employees on how to cut cost. Doing this will make them understand that the company cares for them and is interested in their opinion. Many of them might end up volunteering for a pay cut or unpaid leave because you have put them in a situation where they can empathize with the company. At this point, they won’t have any problem with the decisions you make even if it is going to affect them at the end of the day.
Partner with other businesses that are not competitions
If you have a small and growing business that might be significantly affected by the pandemic, you can partner with another business that is not a competition. For instance, you can share your workspace, internet, equipment and other essential things with another company to reduce rent and other costs. If the system works for you, you can continue with the arrangement post-pandemic.
Cut non-essential spendings
Cut all spendings that don’t contribute to the growth of your business directly. Apply the rule – “if we can do without it, we don’t need it” – to your business.
Try alternative and cheaper ways of operating
Businesses can cut back on expensive tools or methods of operating. For instance, if your business relies on marketing, you can try affordable marketing strategies that won’t cost you a fortune and would still help you to remain visible in the business world. Covid-19 has proven that email marketing and social media are effective marketing tools, and many businesses should adopt these tools to remain relevant in their industries. You can also replace other expensive methods of operation with cheaper ones.
Reduce payroll expenses
A company’s payroll makes up to 15 to 30 per cent of their gross revenue. According to Secondwind Consultants, businesses fail when their payroll exceeds 30% of their gross revenue. Businesses can cut payroll expenses by cutting some bonuses, compensations and incentives enjoyed by the employees. Companies can also introduce remote working, part-time work or limited days to reduce pay. These measures, as unpleasant as they might be for the employees, are good ways for businesses to remain strong amidst the pandemic.
Renegotiate fixed fees
The pandemic has forced many to be considerate and understanding, therefore, business owners should seize the opportunity to renegotiate some fixed fees like rent and subscriptions. While renegotiating might be favourable for some, it might not yield any result for others. However, it won’t cost you anything to hope and see if you can reduce cost through this method.
Establish a hiring freeze
If you are not in the health care industry and other thriving industries, the last thing you need in your company during the pandemic is a new workforce. Companies can encourage and train their employees to take on other roles pending the time things go back to ‘normal.’
Reduce the company’s workforce
As heartbreaking as this might sound, to cut cost, some companies may have to lay off or terminate some of their employees. However, this should be the last option for any company looking to cut cost.
This period is not the time for businesses and their employees to live in luxury. It is the time to get rid of the non-essential and unimportant things companies invest their money in. What all businesses should strive for at this stage is; coming out of the pandemic strong, if possible, stronger than they were.