By: Drew Page
In light of the global pandemic, the economic landscape is changing for nearly every industry and it’s essential business leaders act swiftly and diligently in order to survive the recession.
No matter what industry your business serves, whether it’s insurance, healthcare, or education, disruption has rippled through them all. From uncertain claim coverage regarding coronavirus, a freeze in elective healthcare, to campus closures, we’ve all had to adapt.
In this article, we feature expenses business leaders can re-evaluate and reduce to survive an economic downturn.
Sprawling Office Spaces
One of the biggest line-items on the balance sheet of many businesses is their leased office space. Thankfully, the real-estate required to house your knowledge workers is shrinking with each innovation in the remote workflow.
As of late, many of us have participated in a global work-from-home experiment. The shelter in place forces us to test the limits of our productivity and abilities to remain focused with parents, children, spouses, flatmates, and others present. Many pundits have hypothesised that companies will downsize their office space and with companies like Square and Twitter creating initiatives to do just that, it’s likely these estimations won’t be far off.
If your business has an expensive headquarter but can effectively operate remotely, now is the time to reconsider whether working from home or working in-office is better for your team. If you determine WFH efficiency outweighs in-office, you have the rare opportunity to cut ties with that expensive office lease and move towards a fully distributed team.
Underperforming Employees and Contractors
Another realisation many companies have made after reviewing their team’s ability to work from home is that some employees thrive in this environment, while others struggle to get their work done.
It’s an unfortunate reality that when economies contract, financing and liquidity dry up forcing them to lay off many employees. Some companies look at the wages and salaries on their balance sheet and assume they can make even cuts across the organisation, without considering how departmental performance plays a role in the business.
If you set out to cut 20% of your staff, have you stopped to consider which 20% has the biggest impact on revenue? Pareto’s principle states that 80% of the effects come from 20% of the causes. You wouldn’t want to make the 20% cut entirely from your sales and marketing team, given their disproportionate influence on revenue.
Instead, analyse the performance of each department, team, and employee before making the final decision on layoffs. Don’t throw your star performers out with the under-performers, like throwing the baby out with the bathwater.
Immeasurable Marketing Expenses
In his iconic business book, Measure What Matters, venture capitalist John Doerr discusses the importance of setting quantifiable goals company-wide and measuring performance against them.
Marketing expenses are measured by a few different metrics, Click-Through Rate (CTR), Cost Per Thousand Impressions (CPM), and Conversion Rate (CR) are among a few, but the most important metric in marketing is Return on Investment (ROI).
If you are looking to cut back on your marketing expenditures in the wake of the pandemic, you must first look at where most of your ROI leverage comes from. For example, if your social media marketing expenses fail to drive sustainable returns, consider scaling those efforts back or suspending them entirely. If retargeting advertisements, however, drive a significant portion of your marketing ROI, consider doubling down on those strategies.
Create a Healthier Business Moving Forward
We touched on this already but businesses that make moves towards a more sustainable financial model will come out of this pandemic in a healthier position. The businesses that will do best are those that have had principles and practices in place to limit their exposure to economic deterioration.
For many, however, it’s not too late to make the changes necessary to survive the recession and come out the other side in a better state. For even more expenses to reduce or eliminate from your business liabilities, check out the visual below from Embroker featuring 16 expenses that can be most wasteful.
Drew Page is a content marketer from San Diego, where he helps create epic content for companies like Embroker. He loves learning, writing and playing music. When not surfing the web, you can find him actually surfing, in the kitchen or in a book.