Though things might be tight economically for your Wilmington business, keep in mind, cutting corners can become a real issue.
Take for example fake reviews that are so pervasive online. Some business owners are tempted to buy reviews to get their product or service seen online. If you’ve ever done that or been tempted to do that, let me just say: DON’T.
If Google catches it, they’ll not only flag the review, they’ll tank your website rankings. And now, the Federal Trade Commission is proposing to slap big fines on businesses that do it (up to 50k for each fake review… YIKES!).
I also saw during the pandemic that business owners were falsely collecting PPP and ERC loans to get a free handout from the government when they didn’t actually need it. The IRS is on the hunt for those kinds of people right now — look at this 53 million in PPP fraud case in north Texas.
What I’m getting at here is you don’t have to choose these routes to help your business in difficult times. And even though times continue to be difficult financially, there are options for you to help your business survive the inflationary chokehold on it.
That’s where I want to go today. Instead of cutting corners, let’s talk about cutting costs and helping you find your way right now.
Cutting Costs in Your Wilmington Business Right Now
“The slightest adjustments to your daily routines can dramatically alter the outcomes in your life.” – Darren Hardy
Nobody needs to remind us small-business owners that we’re yet again in tough times… still dealing with inflation at about 4% year over year, coupled with nagging and sporadic supply-chain problems and all the other troubles that go with having your own company.
Tough times often mean tough decisions. If you have to make cuts, where and how do you decide to do that — for the good of your company, your staff, and yourself?
The following are some areas you should consider.
Cutting Costs Tactic #1: Pricing
Let’s look at the other side of the coin for a second: raising prices. I know what you’re thinking, but raising prices doesn’t raise eyebrows like it did a few years ago. The key question that remains is: Raise by how much?
Before you calculate your own new higher average costs and just slap that down across the board, ask yourself:
Do you stand out? What makes you special? Why should your customer pay you? Special services are worth more, and customers know it. Loyal customers will pay more, too — for a while.
What’s your competition’s price point and range, and how does it compare with yours? If yours is higher, don’t automatically assume that you have to match your competitors’ deals. Do you offer your customers something the other guy doesn’t? (Be honest.) What do you offer that draws in most of your new customers?
When raising prices, do it gradually and be upfront with customers about price hikes. People will put up with more if they’re kept informed.
It’s possible that maybe your product line needs a revamp. Low sales figures are your first obvious sign of a poorly performing product. Other signs include marketing costs that are too high or price points that are too low. Also watch for bad customer reviews.
Cutting Costs Tactic #2: Making shifts with suppliers
Lately, these folks seem intent on hiking prices at will. You may also be dealing with years of consolidation, another ingredient for our perfect storm.
Suppliers may have a lot of companies wanting their goods right now. What if you don’t negotiate with suppliers but their other customers do? You can wind up with poorer products or service with higher prices as your supplier makes up for deals they cut with your competitors.
Before you negotiate with suppliers, though, set a price in your head that you’re willing to pay. Double-check that your payment record is good and learn all you can about your suppliers’ expenses. (Wholesale prices are easing but still went up 2.3% in the past year.)
Cutting Costs Tactic #3: Looking at your staff
If it comes to this point, there’s probably more arithmetic in reducing pay/hours than any other cost cutting. Who does what and for how long? Who could do each other’s jobs for less money? Communicate with your team that keeping the lights on is more important than temporary payroll reductions; you might even find one or two people willing to volunteer cuts.
- Should any roles be replaced with automation? (If going for new or any other kind of equipment for this, consider refurbished — it’s cheaper.)
- Freelancers and independent contractors tend to be more expensive upfront, but they do spare you the price tags of health insurance and other perks and payroll taxes. Be aware that tax authorities are watching more closely now whenever companies claim a worker is an “independent contractor” without adhering to many conditions. Check with us before you make this move.
- Re-think raises. The average one last year was 7.6% — a noticeable bite in your payroll budget (wages are also up about 5.7% over the past year). Raises compound: Down the road, they’ll be the base on which you’ll have to calculate further raises. Try giving bonuses tied to events or linking raises to promotions. No worker would expect those to be handed out annually.
- Cut your own pay. Some owners have followed the headline self-sacrifice of big-time CEOs at the likes of Apple and Intel — but think before you go noble with your personal finances. Map out how long and at what percentage your haircut will be, and have a plan for the money saved.
Cutting Costs Tactic #4:Examining additional areas
Recurring costs. Rather than utilities and other necessities, these are your subscription services that get renewed automatically, usually every month. If forgotten, they drain a lot of cash. Review them frequently.
Insurance. This cost could change year to year — and auto-renewal might be costing you too much for coverage you don’t need anymore. You can also likely save by bundling coverages.
Supplies. Ordering online has made saving money in this category easier. Amazon’s subscribe and save service is one example of how you can find cheaper prices for a galaxy of stuff and even cheaper shipping when you bundle deliveries.
Deciding where to make cuts in your Wilmington business is tough, especially if it comes down to having to drop some of your staff. I’m always here to help, answer questions, and offer ideas. Don’t hesitate to reach out:
Cheering you on,
Karen S. Durda, EA