Business | 10 min read
Proven Cost-Saving Strategies To Help Your Business Survive: What To Do In A Financial Crisis
Life is like a box of chocolates. You never know what you’re gonna get. Remember this famous phrase of Forrest Gump? That is what’s happening today — we opened the box, and we faced some uncertainty.
The COVID-19 or SARS-CoV-2, which is better known as coronavirus, leads to worldwide quarantine and isolation. As a result, it has a significant impact on a global economy that causes recession and crisis, in turn. According to an OECD report, the annual global GDP growth is likely to drop to 2,4% in 2020 as a whole.
Some businesses become bankrupts, the unemployment level is rising, and entrepreneurs who still stay afloat are looking for ways to keep their business working. However, it is possible to save your business if you will keep up with specific recommendations. This article will help you undertake crucial steps and provide financial-saving tips. Go ahead!
Economic Downturn Or What Does Recession Mean In Business?
The COVID-19 outbreak turned out to be an extreme fear in financial markets where investors faced a real problem: the global recession and slowdown of the economy are taking place. What is a recession, by the way? It is a general decline in economic activity. And the effects of the recession on business are evident — economic downturn means the stagnation of all financial processes.
Due to the quarantine, people stay at home, don’t travel anywhere (travel companies and airlines suffer most), restaurants don’t work, some factories are closed which means the decrease of supply chains. That is how the impact of the recession on business looks.
And the longer the pandemic lasts, the more negative effects it will have on a global economy. At the moment, everything depends on government officials in all countries where the SARS-CoV-2 is raging. Mass restrictions and quarantine may help slow down the spread of the virus and control it.
By the way, China had the first economic contraction since the 1970s. And considering that China is the world’s second-largest economy, there will be consequences on other world regions. So you should know what to do in recession and what steps businesses typically take in a recession.
Prepare For Economic Crisis: Useful Tips On How To Survive A Recession
To make your business prepared for any economic fluctuations, you need to have a saving money plan. We will provide you with crucial recommendations on how to cut spending and save money, and even make your business grow.
Try To Reduce Inventory Costs
The first thing you need to do is to look through the possible ways to reduce inventory costs. But it shouldn’t affect the quality of goods and cause inconvenience to customers. If you order too many items, maybe, it is the right time to reduce the number of items. Or you can look for other suppliers and find the same items at a better price. Also, there may be shipping alternatives that will cut costs.
And remember that you may reconsider some things that were done before in a particular way. You build a plan to save money, and that sums it all up.
Monitor Your Cash Flow
Cash flow is what lets your business live and move on. To make sure your business will remain viable, you need to ensure stable cash flow. To do it, you should review your credit policies and credit histories of customers to protect your credit. Besides, you need to know your financial forecast — it will help you evaluate better possible losses.
Also, try to renegotiate contracts with landlords, lenders, and contractors to discuss lower rates if it is possible. The matter is that the crisis will affect everyone, so your partners likely meet you halfway.
Eliminate Non-Essential Expenses
This is one more suitable way how to cut costs in a company. Your goal is to understand what activity is necessary for your business and which one can be removed, at least temporarily. We bet you will find some expenses that can be eliminated, and the company will become more stable. But remember that wages reduction is the last option, it is recommended to reduce costs in some other business activities first.
Staff Layoff Avoiding And Why Services Outsourcing Is An Option
When a business starts losing its position, it gradually leads to layoffs, and your staff has to survive and look for other job positions. Well, if your business makes it possible for employees to work remotely and do their job efficiently, then there are no issues. Moreover, remote work allows you to cut expenses on rent, and this is how small businesses can save money, in particular.
However, what could you do if you’re planning to create software for your business or build/improve the design of an existing website or mobile app? Is that a signal that you need to close down the project? Not yet. Remember that there is an opportunity like software development outsourcing.
How can a company reduce costs for development? You can choose local outsourcing and find software developers in your country who will assist you. But depending on a region your business is located, hourly rates may vary. And offshore software development may come to the rescue.
Hourly rates in regions like North America will be the highest. On average, rates vary between $150 - $200, depending on the developer's level and the company’s size. Whereas hourly rates in Europe will be much lower. Rates in Western Europe may be in the $75 - $100 range. And countries in Eastern Europe provide $25 - $50 rates, but the main advantage is that the quality level is also very high.
Cadabra Studio is located in Ukraine, and the company is always ready to become your troubleshooter. We can build both software on turnkey basis from scratch and UI/UX design for the project that is already developed. So we are always at your disposal. You can also find out more about the pros of outsourcing in our article about finding a reliable specialist in order to create a successful product.
Become Closer To Your Customers
If you are determined to discover how to survive an economic crisis, you should know everything about your customers. And creditworthiness is the first thing to know about them. How customers feel, whether they plan to keep on using your services, how an economic slowdown affects them, etc. Staying in touch with customers will be your advantage over competitors’ services.
Conduct some surveys or even contact your customers personally if there are not hundreds of them. Provide them with new exciting terms of cooperation, offer incentives and discounts in case of long-term contracts conclusion.
Build Up Your Banking Relationships
Your company needs to let your lenders know the situation about your financial position. Banks don’t want to lose their customers, but they don’t want to undertake risky loans with non-credible companies. At the same time, recession time is not the period when banks will issue loans quickly.
Improve Your Services And Adapt To Changes
Charles Darwin said: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.” How can a business survive during the crisis? The answer is to adapt. That is, you need to think about online services provision if you haven't done it before. Quarantine restrictions exist. So your goal is to eliminate face-to-face contacts and provide users with online services.
Besides, improve the quality of services since customers must be aware that your company is trustworthy. Your competitors will also try to find a way out of the resulting situation, so don’t lag. Besides, the number of customers may decrease, consider it as well. And learn more about tips to turn business risks into benefits during the COVID-19 outbreak.
Don’ts To Adhere To When The Survival Economy Hits Your Business
We hope that money-saving ideas for companies mentioned above will be useful and practical for your business. However, there are certain don’ts you should keep up with. It means you may face steps that shouldn’t be taken.
Don’t ignore the problem. If you stop taking crucial steps for keeping your business moving on, you may either stay at the same level or even lose your business and become bankrupt. While competitors improved their services and doubled their growth.
Don’t cut costs on marketing. Many small businesses think that marketing costs should be reduced first during the recession. It is a big mistake. Because the crisis is the time when you exactly need marketing. Marketing services are necessary to monitor the needs of your customers and adapt to them. A satisfied customer makes the business survive.
Don’t get in despair. In the Chinese language, the character “crisis” comprises two words — danger and opportunity. What does it mean? Just don’t give up. You can always find a way out even if you think that the door is closed. Besides, today many countries try to mitigate risks for small businesses, providing them tax extensions and related assistance to support businesses.
We think these recommendations will help you save your business, and knowledge of how to survive an economic crash will be invaluable. Remember that the crisis won’t last forever. It will pass, and the demand for services and products will start increasing again. And your task is to catch the right moment and capture the attention of new users with your product.
So do your best, and you will succeed. Cadabra Studio knows the secrets on how to make your business grow, so we are looking forward to your questions — contact us right now! When you think it's too late, the truth is, it's still early.