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8 Ways to Cut Costs Before You Have to Do a Layoff

4 min read • Apr 21, 2020 • Grant Olsen

Businesses around the nation are struggling to endure the negative effects of the coronavirus outbreak. A survey commissioned by Lendio revealed that 43% of small businesses had felt direct impacts on their finances. When asked if they were considering laying off employees in order to keep their business afloat, 17% of these businesses responded that it was a likely outcome.

“To be sure, a cost-cutting reflex is understandable,” says a Harvard Business Review article on the decision to lay off employees. “Leaders are obligated to make responsible decisions to keep their companies afloat. But those who manage the economic effects of this crisis in a clear and compassionate way create more value for their companies and will come out of this pandemic stronger than ever before.”

While extreme situations will sometimes make layoffs inevitable, many businesses can avoid that action by cutting costs in other ways. Here are 8 ideas that just might help you retain your staff:

  1. Reduce vehicle costs: Owning vehicles is required for many small businesses, but you can reduce the negative effects on your bottom line by limiting how far you drive. For example, utilize free shipping whenever available so you don’t need to drive to other locations for item pickups. Also, consider leasing your vehicles in the future so you don’t have to fork out money for maintenance and suffer the effects of depreciation.
  2. Make your office more affordable: Now could be a prime time to talk to your landlord about negotiating more favorable terms on your lease. If that’s not possible, consider looking for a new workspace. Also, remote technology makes it easier than ever for part or all of your team to work from home.
  3. Revisit your benefits: Take this opportunity to thoughtfully look at all the perks and benefits you offer employees. Perhaps you could postpone your weekly office lunches or discontinue your company’s 401(k) match until your financial situation improves.
  4. Barter whenever possible: You can potentially keep cash in the bank by bartering for some of the goods or services you’d usually pay for. The key here is having something of worth and relevance that you can share with the other party. This informal style of business symbiosis is ideal for small businesses that already have a good working relationship with other small businesses.
  5. Trim your advertising: Review your 3–4 most expensive advertising channels and look for ways to reduce the spend. Facebook is one of the best overall platforms right now, and the cost is minimal. You can also leverage the cost-effective benefits of email marketing.
  6. Reconsider your insurance: The coronavirus pandemic has reinforced the need for insurance during a disaster. But are you getting the best rates? Talk to your broker and see if there’s a comparable option that could save you money each month.
  7. Lower your tax bill: Even if you are currently using business deductions on your tax filings, you can probably do more. To maximize this money-saving opportunity, educate yourself on all the relevant deductions and then carefully track all of your qualifying expenses. If you’ve got the receipts and documentation to back up your deductions, you can save a bundle when April rolls around.
  8. Dial back your donations: It’s important on many levels for your business to be philanthropic. But when times are tough, there’s no shame in reducing or discontinuing some of the initiatives you currently have in place. Take care of the people within your walls first so that you can get back on solid ground and continue making a positive difference in your community.

Before you pull the trigger on any of these cost-saving ideas, you should have an honest discussion with your employees. Let them know how the business is doing and why you are considering changes.

The most important thing is to ask for suggestions from your employees. First, you could be surprised by the incredible ideas they might have. This collaborative approach also proves that everyone in the business has a voice in the process, making them more likely to feel invested in the chosen initiatives.

Be sure to make all savings initiatives shared throughout the company. This approach means that if you’re implementing salary cuts, your salary should be decreased the same as your employees’, if not more. By keeping the cuts equal, your entire team can feel like they’re part of the solution rather than the sacrificial goat. This helps maintain engagement and unity in the office during already turbulent times.

By clearly articulating your ultimate goal of saving jobs, your employees will know your heart is in the right place. And they’ll be more motivated to do what they can to make it possible.

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Grant Olsen

Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.