Cost-cutting is a prudent strategy for businesses struggling to survive the coronavirus' (COVID-19) economic impact. According to Harvard Business School, the average small business has enough cash reserves to last just 27 days. Positive cash flow is critical to maintain solvency and when sales are slow, cutting costs can help companies stay in the black.
Hit by the Covid-19 slump followed by social distancing and lockdown, businesses are experiencing major impacts no matter how established they are and are having to re-look at how they manage and operate their business including re-visitation of their business plan. It has become challenging for most businesses to keep their financial wheels turning during the lockdown period due to less revenue churn and the general uncertainty in the global financial environment.
Businesses must spend money to make money, but now is a time to exercise frugality. It’s also a time to audit providers to identify money-saving opportunities.
• Remote services have enabled businesses to maintain operations, but that’s not the only benefit; it also saves money. When you go with remote/outsource model, the major benefit is you don’t have to worry about wages and the related operational costs!
• Digital marketing is more affordable than print marketing and media buys. That fact, coupled with a “captive” audience, means it makes sense for businesses to consider moving sales online. Doing so could reduce overhead and marketing costs plus provide much-needed revenue.
• Companies can investigate whether free, open source alternatives exist for their favorite software. For example, casual Photoshop users can get by with GIMP or Pixlr. Microsoft Office users can make the leap to Google Docs or Open Office. Many companies are also offering extended free trials that can help businesses save money without losing access to premium platforms.
Businesses can cut back on marketing expenses while they weather the storm, but that doesn’t mean they should reduce their marketing. Rather, it means they need to seek new, affordable ways to maintain their presence during the crisis. Here are some ideas:
• Things have changed since the quarantine began, so businesses should review which marketing strategies are currently working and direct their priorities accordingly. Poor-performing campaigns should be eliminated to maximize efficiency. Focusing on what is working can help companies maintain positive cash flow during the crisis.
• Business leaders can get free publicity for their companies by offering to serve as sources for journalists and other media members, who are seeking insight on how the pandemic affects markets and industries. They can also contribute columns to relevant publications and create free resources to help the public navigate troubling times. That kind of exposure not only helps businesses maintain presence, it also lends authority and credibility to brands.
It doesn’t cost anything to plan, so businesses that have their costs under control can begin planning their post-pandemic marketing strategies. Whether companies expect the market to rebound or falter, preparation positions them for success when the quarantines lift.
Before cutting costs, companies should create cash flow projections to identify how much they need to save to survive the coronavirus crisis. Cash flow projections can help businesses determine how much money they need to save and how much is available to spend. Companies can forecast revenues for one, three, six, twelve months and beyond and compare them to anticipated expenses. Doing so will help them make intelligent choices that both reduce expenses and enable them to maintain presence so they’re prepared for success when the pandemic ends.