Firms are always searching for ways to trim their costs and increase their revenue, in good times and in bad. Vicki Arnstein considers the steps you can take to make your business leaner and more profitable
- Carry out an audit. Review your outgoings and incoming revenue. This will highlight any costs that seem particularly high and any parts of the business where your revenue has inexplicably dropped.
- Streamline your running costs. Could you cut your utility bills by turning off all electrical equipment every evening or making sure your heating system is energy efficient? Review your travel costs and consider how much of your work could be done online and at home.
- Assess your staff bill. If you have surplus resources for the work available, look for ways to reduce staff costs. Ask employees if they might be open to voluntary measures, such as reduced hours or pay. Take legal advice if considering changing employees' terms and conditions.
- Improve your purchasing. Assess the cost of any materials needed to supply your goods or services. Could you reduce this without making your products less desirable, such as by switching to slightly lower specification materials? You could also consider putting work out to tender to root out more cost-effective suppliers. Review your utility providers - there are a lot of gains to be made by comparing tariffs from different energy companies.
- Reduce your stock. Consider whether you can cut back on the level of stock you hold. Can you get hold of or manufacture items quickly enough to satisfy customer orders without having goods sitting in storage for long periods? Aim to keep just enough stock to service your customers' needs.
- Look for growth opportunities. With competitors potentially falling by the wayside, look for ways to take advantage and expand into different parts of the market. Now might also be the time to seriously consider mergers with competitors to strengthen your position.
- Protect your marketing spend. Cost-cutting is key during a downturn, but continuing to spend on marketing is vital to attract and retain customers. Focus your marketing efforts on your most profitable customers and calculate how much revenue you need to make for your advertising spend to be worthwhile.
- Boost staff productivity. Home and work worries can make employees less productive during a recession. Try to increase morale by offering low-cost incentives, such as monthly vouchers for the best performing team. Keep employees informed about what's going on in your business to help build trust.
- Protect against currency fluctuations. If you do any business overseas, protect your business from adverse exchange rate fluctuations by trading in pounds where possible, setting up a foreign exchange bank account or drawing up a forward contract with your bank (buying an amount of currency at an agreed exchange rate on a fixed date).
- Keep on assessing. Reviewing your spending and seeking ways to boost income should be an ongoing process. Make sure you regularly take stock of where costs can be trimmed and your revenue boosted.
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