If you’ve been following the news on SA’s economy lately, or have given up following it as you put in extra effort to keep your business profitable in challenging times, you’ll know that the local business sector is experiencing a bumpy ride.
Times may be tough, but there’s only one optimistic thing to do as a South African business owner – buckle up and cut costs. Let’s take a look at 5 strategies you can use to streamline your business.
1. Don’t get into debt
Falling revenue and rising costs causes a lot of business owners to borrow money in order to stay afloat – this is a very bad idea. As you borrow more, the interest and repayments will add to your monthly costs, making it that much more difficult to repay your debts eventually. Financial experts refer to this as the “extend and pretend” strategy. Everything seems to be going well until you can no longer afford to make your debt repayment. There are better ways to stay afloat.
2. Transfer your productivity
There’s a clever trick that business experts like to call “productivity transfer”. We like to call it “doing more with less”. For example:
- you may want to streamline your staff by hiring freelancers, or
- make a simple change like asking your team to bring their own coffee mugs to work to reduce your spending on paper cups.
If it’s possible to get the same job done while spending less money, there’s no reason why your business can’t thrive in a difficult economy. You will have to take a look at every area of your business and find ways to reduce costs, but once you’ve invested the time that’s required, you won’t regret it… especially when you meet with your accountant to discuss your healthy profit margin.
3. Watch your monthly overheads
Nothing eats away at both profit and cash flow like high monthly overheads, or fixed expenses. Your wage bill, rental for your premises, equipment rental and maintenance costs, insurance, vehicle instalments, and other regular payments can often be reduced. As mentioned, it’s all about getting the same value or use out of something, while paying less.
4. Put off expensive decisions
If you were thinking of expanding your premises or hiring new permanent staff, you may want to rethink these decisions in the current economy. Of course, if things are going very well and you can see your business thriving in the next year or two, it may be fine to expand your operation. But if you do decide to hire new staff or invest in a larger office space, you can use the current downturn as a negotiating point to get a better deal. Jobs are scarce during a bumpy economic period, and so are office tenants. Keep this in mind when you negotiate with real estate agents and prospective staff members.
“you can use the current downturn as a negotiating point to get a better deal”
5. Keep your team motivated
As you take steps to reduce your costs, don’t be surprised if your team members start to sit up and take notice. They may be worried the business is struggling, but if you explain your strategy to them from the outset and get their co-operation from day one, you’ll be left with a lean and motivated team that may just go the extra mile for you. With a smaller, more productive team you will be able to stay profitable, pay competitive salaries and even pay bonuses at year-end.