By Drew Page
There is perhaps no time more important for business owners to know where their operating expenses are coming from and how to remain solvent than during a crisis. The unprecedented nature of COVID-19’s impact on the global economy cannot be overstated. The economic impact will likely be felt for years to come, but businesses that implement fiscally responsible practices can survive, and even thrive, in this environment.
In fact, throughout the period of quarantine, many businesses have done some self-reflection and realized that many of the things they thought were necessary operating expenses are actually not necessary at all. It appears the methodologies behind the “lean startup” are starting to permeate into every business and industry that takes part in this global economy.
Management expenses that should be trimmed
It used to be, business deals were done face to face, and that was that. We sent our employees on business trips, writing off the expenses as the cost of doing business. Today, however, the business world is realizing the effectiveness of remote collaboration tools, and the thousands of dollars that would otherwise be spent on a business trip can be used for other, more productive purchases.
And that’s just the tip of the iceberg. Let’s take a deeper look at some management expenses that most businesses could reduce, if not eliminate entirely:
Expensive office space: One of the largest figures in the liabilities column on most small business balance sheets is leased office space or other real estate arrangements. In some business models, this expense cannot be avoided, but in most, it could at least be significantly reduced from current levels.
Many businesses are continuing business as usual throughout the quarantine and realizing productivity can still be maintained, even while employees are working from home. There are examples of entirely distributed companies being built successfully, proving our world can maintain current levels of productivity while working remotely.
If eliminating rented office space is not ideal for your particular business, one strategy to reduce the financial burden is to implement a desk sharing system where some employees can work from home a few days a week, while the alternating employees use the desk in the office.
These arrangements can slash the space requirements needed for your business while still maintaining some face-to-face interactions within the company. This could be the balance that your business needs to boost employee morale without sacrificing productivity and collaboration.
“Technical debt”: Any decision that makes long-term sacrifices for short-term gains is a poor business strategy. Technical debt is when you accept subpar solutions that are easier and less expensive to implement, with the knowledge you will need to invest more time and money in the future to fix them. Just like financial debt, it can be an easy short-term decision to take on large quantities of debt, but this will almost certainly come back to haunt you in the future.
Instead, take the time to explore alternative options and external solutions and services that could adequately fulfill your needs without willingly taking on technical debt.
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Human resources and the cost of losing great people
Your human capital is some of the most precious assets on your balance sheet. In times of crisis, many employers look at the salaries they are paying out and assume these must be the first to go. This can lead to rounds of layoffs where top performers are let go and the figurative baby is thrown out with the bathwater.
Renegotiate compensation structures: Instead of letting your top talent go and potentially work for the competition, try to renegotiate the terms of their employment at all costs. For example, if your sales team would be willing to work for a lower base salary in exchange for a higher commission, your top reps may actually prefer this structure. This compensation structure will also help identify and reduce any employees who don’t belong in their hired role. For other crucial roles within your company, consider hiring top-performing contractors or freelancers.
Lavish perks: We’ve all heard the stories from the Googleplex: free gourmet meals at all hours of the day, on-site child care, laundry facilities, and much more. While most businesses don’t take the perks to this extreme level, it’s possible your business is wasting money on unnecessary ones.
Some perks have become staples across nearly every business and industry, like 401(k) matching, healthcare coverage, and snacks and drinks. Consider which perks are positively impacting your company culture, and ask your employees to vote on their favorites and make compromises. It’s likely most employees would agree their 401(k) matching is more important than a few bags of potato chips.
Even a temporary pause on all perks, 401(k) matching included ,would be warranted (and widely accepted by your team) in the current economic climate, especially if it can justify postponing or avoiding layoffs altogether.
Adapting to the new normal
Businesses must pivot and stay agile during any economic environment. As the world shifts to accommodate the new normal after the 2020 global pandemic, we will learn from our experiences and build stronger companies moving forward.
It’s up to us to navigate this new normal—the entrepreneurs, the owners, the operators, the employees—and to create better products, services, and businesses in the process. We are all in this together and applaud everyone doing their part to save jobs and companies.
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