The economy is hard, and maybe a far way off from improving. Nigeria’s inflation rate surged to 20.77% in September 2022, up from 20.52% recorded in the previous month. If you thought business was getting tough, sit tight and fasten your belt, it’s about to get tougher.
The Monetary Policy Committee of the Central Bank of Nigeria during the September MPC meeting in raised the benchmark interest rate by 150 basis points from 14% to 15.5%, the highest level in 20 years. There are several worrying stats that should show you that it is time to make adjustments in your business. This should be the time to apply operation SAP – Structural Adjustment Program. And the first on your list should be to cut down on your business costs.
Every kobo counts, and if you want to stay profitable, here are 7 things you should add to your to-do-list.
Let go off the products that don’t sell well
Numbers speak all the time. You just need to listen. Your sale numbers tell you what you should be selling and what you should not be selling at all. Problem is, some small business owners still ignore the numbers and make emotional decisions. The fact that you saw this lovely scarf, and fell in love with it, does not mean that people will buy it. In fact, you may have been experiencing difficulty selling a particular product for years, and instead of dropping it completely, you keep retweaking and repackaging it. If the customer does not want the product, they will still not want it even if it comes in a chocolate box. Make the painful decision of letting products go, if the numbers don’t justify keeping them.
Focus on the products and services that make the most money, and stop sinking more money into products that are not selling.
Purchase bundle services
Think of those services you purchase regularly, and find out how you can pay less for more by buying in bulk. For instance, if you purchase a monthly data plan of 40GB at N5,000, find out if there are bi-monthly or quarterly plans where you can get 120GB for N10,000, or 200GB for N15,000. In this way you would be paying less, and you may be surprised to see that the N10,000 could sustain you for 3 months. This illustration is for small businesses, but it can apply to businesses at all levels.
For example, you can also apply it for logistics service. Let’s say you pay N1,000 for every delivered product, you could negotiate a 20% discount and make a one-time payment of N120,000 for 150 deliveries. With a package like this, you can make offers like “free delivery for 10 customers who make purchases over 50,000”. Bundle services save money all the time, so long as you are using it on otherwise regular purchases.
Automate your processes
If it is possible to automate any part of your business processes, then you should. Automating processes means that after the initial costs, you will have a more streamlined process and thus, spend less on labour costs. There are tools that can take care of and automate several tasks, from creating and posting content on social media, to receiving and processing order and payments, etc. Do your research and begin to adopt them one after the other, to automate your process so that your employees can be free to attend to very core tasks.
Make the most of your resources
Another thing you should do is to take an inventory and analysis of your current business structure. List out those resources you are not making the most of, and see how to monetise them. Do you have too much storage space that your goods cannot contain? You can possibly lease out some of it> Since rent is a fixed cost that you have to pay whether or not you use it, the best way would be to lease out spaces that you are not making the most of. Do you have empty office spaces that you can lease out for small events like trainings and meetings? What about furniture and other supplies? You might be surprised to find out that people would be willing to pay small fees to make use of some of the furniture lying idle in your space. These are all part of your resources and you have to explore ways of maximising them.
Negotiate with vendors for loyalty offers
If a supplier or vendor is not going to be offering extra benefits for sticking with them, then maybe you should try others. For instance, if you are purchasing insurance for your business, feel free to compare the offers from several companies. There are some that offer some percentage cashback at the end of each financial year if you do not have any disaster/emergency during the period covered. There are some that might offer you added benefits in the second year, for the same fee.
Look out for suppliers and vendors that offer some sort of reward when you have stuck with them for a while. It could be a 10% discount on your 6th monthly purchase. These little things helps you cut down some business costs.
Know when it is cheaper to outsource and when it is cheaper to hire in-house
Outsourcing tasks can be cheaper for a small business, but it is expedient that the business owner recognises when it is cheaper to hire a talent in-house. It may be sensible to outsource when you only need that expertise once in 3 months, but when it gets to the point where you need this talent almost every week in your business operations, it may be reasonable to consider hiring.
Knowing when and why to opt for outsourcing, or to hire a talent in-house is critical to cutting down business costs and saving on time as well.
Reduce Bank charges or switch to a bank that rewards you for transacting
Bank charges may seem negligible but if your business is one that receives and disburses payments in volumes on a daily basis, you could be losing significant money there. One way to reduce immediate business costs is to reduce the sum you pay in bank charges.
There are several reasons to choose a bank for business purpose but one important point to consider is the transaction charges. If you do your research, you may find that there are banks with zero transaction charges on up to 100 transactions in a month. Some may even reward you for transacting, and offer some percentage cashback as reward. You’d be surprised to know that there are several packages, designed by commercial and microfinance banks, to cater the needs of small businesses trying to keep expenses low.
Build a cheaper marketing plan
Marketing can be quite expensive, but there are always cheaper alternatives you can try out. There are a number of options to explore if you are marketing on a zero budget, However, this is not to say that you should cancel out paid marketing plans that are bringing in sales. But you should see how you can bring in more sales without adding to your expenses. This may involve modernising your marketing efforts, implementing a referral reward system, exploring email lists, building more network and doing more content marketing.
If you have not been marketing your products online, do so and enjoy some of the fast-paced, high-result, low-cost marketing.
Create and Stick to a Budget
You already know that impulsive spending is bad for your books, so if you are looking to cut down on business costs, start by creating and sticking to a regular budget. It could be monthly or quarterly. You can read more about how your business budget should look like. Business financial decisions should be intentional, not emotional.
If you can barter, don’t buy
Look out for services and goods that you can barter some of your services and goods with, and enter a barter arrangement. For instance, is it possible to offer free packaging and label services in exchange for free deliveries? Or maybe it is a set of goods for another that you need. Of course, you have to reach a consensus on the units and numbers before you reach an agreement. This canhelp reduce your business costs by avoiding the initial outlay of funds to fill an immediate need.
As a bonus point, treat your employees well. That way you do not have to regularly spend money on hiring, training and onboarding. This is another interesting way to cut down costs.