A new fiscal year is upon us – are you feeling the icy breeze of company shareholders breathing down your neck? Pressure is mounting for business leaders to achieve healthy profits before the UK dips its toes into a looming recession.
These periods of economic downturn are typically characterised by reduced consumer confidence and less spending up and down the country. But if you’re experiencing a decline in incoming business, how can you make up for the shortfall?
Our recommendation is that you cut your operational business costs. If you’re searching for practical ways to trim the fat in the coming months, look no further – here are our top three suggestions.
1. Negotiate your IT contracts
Data shows that software costs for the average organisation are on a steady incline – whether it’s the upfront price you pay or even the associated maintenance fees. These IT costs represent yet another rising expense that businesses are expecting to stomach. But while increases to other bills like energy can’t be easily reduced, many business owners fail to realise that they could be negotiating their software contracts.
Software purchasing platform Vertice explains that this is due to pricing obscurity across the SaaS industry, stating that “as many as 90% of companies are overpaying for their SaaS products by an average of 20-30%.” This is an alarming figure, especially when you consider that digital tools power everything from HR and marketing to arranging your morning coffee order.
However, these fees are actually negotiable, because “as much as you may rely on [vendor] software, they equally rely on your sale”, meaning that there is usually a happy medium that can be reached with your providers to bargain a lower price. Some commonly cited negotiation strategies include signing on for a longer subscription term and using competitor pricing points as leverage.
It’s also worth allowing a generous lead time for negotiations so that you don’t back yourself into a corner needing a quick turnaround, as providers might be less likely to provide favourable contract terms. SaaStr reports that expensive contracts can take larger enterprises over a year to close!
2. Prioritise staff retention
Payroll is one of the biggest expenses when running a business ? and if staff roles are incorrectly aligned or certain responsibilities are being shirked, it’ll cost you money. However, when you’re vying to reduce your outgoings, challenging economic periods aren’t necessarily a wise time to make any rash ‘hiring or firing’ decisions.
In fact, these choices could cost your business if you’re forced to pay out recruiting and onboarding new employees. McKinsey writes that as recession fears grow, 40% of workers plan to quit their jobs – so letting go of staff could be a short-sighted cost-saving measure. Instead, you should be open with your workforce about financial pressures and review roles and responsibilities as you see fit. Rather than making premature redundancies, consider investing in employee development and building a more versatile team that doesn’t pigeonhole staff by limited skill sets.
HR advice firm Croner-i writes that when your business is going through a turbulent period, “managers must recognise the necessity of developing the mindsets, skills and abilities that will allow them and their people to cope with this flux”. But training new competencies doesn’t have to be a large expense ? in fact, there are plenty of free courses available through government schemes and third parties. These can help to upskill employees, boost productivity, and cut how much you’re paying out for wasted manpower.
3. Reconsider the office
As well as your IT and staff costs, reconsidering your physical assets can help to free up spare resources. And what’s the largest of them all? Your office. It’s no mystery that recent years have ushered in a new age for working, with the rise of remote work accelerated by the Covid-19 pandemic – and if you’re still working from a physical headquarters, this could reflect one of your largest unnecessary expenses.
Naturally, some trades call for brick-and-mortar premises – you won’t make much money as a restaurant if you don’t have a restaurant. However, plenty of white-collar jobs can be effectively performed by a dispersed workforce, as proven by the high rates of productivity seen in remote and hybrid-remote workplaces.
But this doesn’t have to be an all-or-nothing decision, either. If you’re not ready to say goodbye to the office, there could be cost-saving opportunities in downsizing. Right Digital Solutions explains that “with the demand for office space predicted to fall and the popularity of commuting into a city at an all-time low, there are deals to be done. Landlords are also likely to offer more flexible, short-term leases you could take advantage of while you make your long-term decision.”
With a bit of reflection, you’ll soon be able to spot the different expense streams that could be right-sized to save money for your business. And once you’ve freed up this budget, you can grow your company and reap the benefits of tactical spending. We wish you the best of luck.
