An economic downturn can be a challenging time for any business, especially startups. If your startup is struggling to manage its cash burn, one of the best things you can do is cut your operating expenses. This will help you extend your runway and weather the storm.
There are a few different ways you can cut costs in your business. You may want to defer long-term investments, postpone hiring new employees, or scale back on non-essential services and software tools. Even if your business is doing well at the moment, it’s always a good idea to be proactive about expenses so that you’re prepared for anything.
Cut Operating Expenses
There’s never a good time for an economic downturn, and there’s no telling how long one will last. For many startups, this means contending with increased cash burn and a shorter runway, at least in the near future.
Ways to Cut Business Expenses
Here are a few ways that you can cut expenses and save money for your business.
1 Rework Your Operating Budget
The first step is to take a close look at your operating budget and see where you can cut costs. You may want to consider deferring long-term investments, postponing hiring new employees, or scaling back on non-essential services and software tools.
2 Lower Your Rent
If you’re a brick-and-mortar business, one of your biggest expenses is probably rent. If you’re struggling to make ends meet, you may want to consider renegotiating your lease or moving to a smaller space.
3 Reduce Your Storage Costs
If you have a lot of inventory, storage costs can be a big drain on your finances. See if you can negotiate better rates with your storage provider or find a cheaper option.
4 Cut travel expenses
You may also want to cut back on business travel. If you can hold meetings virtually, there’s no need to incur the expense of travel.
5 Eliminate Non-Essential Expenses
Non-essential expenses are anything that isn’t absolutely necessary for your business to function. This could include things like office snacks, company parties, and unnecessary software subscriptions. If you’re looking to cut costs, non-essentials are a good place to start.
6 Freeze on Big Investments
In uncertain times, it’s often a good idea to put a freeze on big investments. This includes things like new equipment, office renovations, and marketing campaigns. By deferring these expenses, you can free up cash flow in the short term.
7 Freeze on Hiring
If you’re looking to cut costs, one of the first places you may want to look at is your hiring budget. You may want to put a freeze on new hires or postpone filling open positions. This can help you save on salary and benefits expenses.
8 Eliminate Company Events
Cut back on company events and parties. While they may be fun, they’re often not essential to your business and can be a drain on your finances.
9 Eliminate Company Perks
If your company offers any perks or benefits that are non-essential, you may want to eliminate them. This could include things like gym memberships, transportation subsidies, and free food.
10 Reduce Marketing Expenses
Marketing is often one of the first area’s businesses cut when they’re looking to save money. If you’re looking to cut costs, you may want to reduce your marketing budget or put a freeze on new campaigns.
11 Scale Back on Software and Services
Another area where you may be able to cut costs is by scaling back on software and services. If you’re using multiple different software programs, see if you can consolidate to one or two. You may also want to cancel any subscriptions that you don’t absolutely need.
12 Cancel Unnecessary Subscriptions
If you have any subscriptions that you don’t absolutely need, consider canceling them. This could include things like gym memberships, magazine subscriptions, and streaming services.
13 Reduce Advertising Expenses
If you’re looking to cut costs, one of the first places you may want to look at is your advertising budget. You may want to reduce your overall spending or put a freeze on new campaigns.
14 Reduce Your Inventory Levels
If you have a lot of inventory, storage costs can be a big drain on your finances. See if you can reduce your inventory levels so that you’re not paying for storage space that you don’t need.
15 Reduce Payroll Costs
A last-ditch effort is often necessary, but it can’t be avoided at times. Payroll is usually the most expensive item for startups, and if your company’s revenue takes a hit due to the recession, you may need to make sacrifices in order to remain operational. One way to cut costs is by reducing salaries or hours worked. You may also need to lay off employees.
While an economic downturn can be a difficult time for businesses, there are ways to weather the storm. By cutting operating expenses, you can extend your runway and give yourself some breathing room.
So, don’t be afraid to get creative with your cost-cutting measures. And, most importantly, don’t forget to keep an eye on your cash flow.
Last but not least, keep your employees in the loop. They’re likely to be more understanding and supportive if they know what’s going on and why you’re making certain decisions. After all, we’re all in this together.