It’s on everyone’s mind — inflation. From the increased cost of fuel to the much higher prices from literally everything else we’re all paying more for everything. Nowhere is that more evident than in small businesses. But there are a lot of things a small business owner can do from decreasing spending to renegotiating contracts.
The Bank of America 2022 Small Business Owner Report indicates that of 1,000 surveyed small business owners, 88% state that inflation is directly impacting their company.
First, it was the pandemic, shutting down businesses and completely disrupting the supply chain. Now that we’re on the other side, inflation is putting a damper on returning to normal. Small business owners everywhere are on the knife’s edge trying to stay open and keep their customers happy without losing them.
How does a small business do this against the US’s highest inflation increases since 1982? We have a few suggestions.
Increase cash flow
It sounds rather simplistic, but it’s the top concern of every small business.
Cash flow is one of the biggest factors in a small business’ success or failure. Owners need to stay on top of what comes in and goes out. Otherwise, an owner risks making detrimental mistakes that could cause trouble—or close the business entirely.
Start by preparing a statement of cash flow. Either you or your accountant should figure out exactly what you have coming in and what’s leaving.
Next, ensure that your goods and services are being sold. Products or services that aren’t good sellers may need to be eliminated in favor of those that bring in revenue.
Set aside a cash flow to hedge against inflation and for leaner times. You may not be able to raise prices as some businesses can.
Are your marketing and advertising doing the job? SEO has leveled the playing field for most small businesses so you can get your brand in front of the customers looking for you.
When was the last time you checked into your accounts receivable? You may have some outstanding invoices that are still unpaid.
Audit your spending and projects
Do you know where your money is going? What’s selling and what isn’t?
The Harvard Business Review’s article on the Sunk Cost Fallacy can give you some insight into the concept of “throwing good money after bad.” In other words, when you continue to invest in something that isn’t working just because you’re already heavily invested.
An audit will help you decide where to continue spending money and where to cut back or remove your company’s resources. Track your expenses and review them regularly to determine the value they bring to your business.
Once you’ve discovered what’s working and what isn’t, brainstorm what you can add to your company’s offerings. Review your business plan and find additional contingencies should one revenue stream end.
Pay yourself, separate expenses, and keep current
Make sure you pay yourself. Otherwise, you risk ending up getting the short end of everything.
Another bad habit some business owners have is using personal checking accounts for their business expenses.
One of the worst bad habits is not keeping the business’s bookkeeping up to date. With automated systems, apps, and other options, keeping current on your business’s financial health should be a priority.
Reduce company expenditures
After increasing cash flow and auditing this is likely another task that business owners are reluctant to undertake. But it doesn’t necessarily mean laying off employees, either.
Part of the audit will show you what your business’s overhead expenses are along with flexible expenses. Cancel anything that you don’t need or use. Which expense do you need and which is not paying for itself?
Your marketing is also a target. Review your ROI for each and eliminate those that aren’t helping or bringing in business. Increase things like email marketing and social media campaigns that offer high impact for lower costs.
Is your location costing more than it should? Consider moving to a more affordable space or sublet space you have to another small business.
Review service contracts
What are you spending every month on things your company uses? Maybe it’s time for a second look.
Look at all the service contracts your company pays for every month. Services such as phone, Internet, equipment leasing, waste management, and anything else paid for by contract. Review these costs and understand what you’re paying for regularly. Are you paying for something that you don’t use anymore? Consider whether you need to stay at or reduce the level of service—or cancel anything you aren’t using and don’t need.
For the service you need to keep, research different vendors to see what they’re charging. Keep a spreadsheet of all these costs so you can compare and make the right choice. During inflation, your costs will go up and you don’t want to be stuck in expensive contracts.
This may sound counterproductive to reducing company spending and reviewing service contracts. But there’s a reason why you should at least look at technology investing.
When deployed correctly, technology can help automate those functions that you’re doing manually. You’ll also reduce the risk of errors, improve customer service, and streamline your company’s processes. If a process doesn’t take much thinking to execute, is repeatable, and has few variables, it’s a candidate for automation.
Consider automating things like:
- Sales and marketing, including social media and email marketing
- Email, such as autoresponders for common inquiries
- Purchase orders
- General ledger entries
- Contract creation and renewals
A customer relationship management (CRM) tool can handle many of these functions. Most include a range of built-in features that take these rote tasks so you can handle more important tasks and increase productivity. Identify the repetitive tasks you and your employees are doing, then find the tool that offers the best options for your business.
One of the best-known CRMS is Salesforce. It handles multiple functions like contact management, task management, workflow creation, and customer engagement tools. But it’s not the only CRM tool available, especially for small businesses.
How VoIP Can Help
It might seem small, but how much is your phone system costing you? Do you still have a traditional PBX system that costs for every little thing?
Switching to VoIP can save hundreds on something your business needs—a phone. Cloud-based VoIP delivers reliable phone service with multiple features for one monthly cost that’s less than a basic landline. Features like call routing, call queues, Caller ID, up-and-down scalability, voicemail-to-email, voicemail to text, and other features are included in the low monthly price.
Contact Press8 Telecom today to discuss upgrading your small business phone system to a new, flexible VoIP system for less money than a traditionally hosted PBX system. Talk to us, and we’ll give you a free quote on the system that works for your company.