During tough economic climates organisations start turning toward cost-cutting measures to increase or maintain profitability. Both Google and Microsoft have announced layoffs for tens of thousands of employees in 2023. But how do non tech companies that more heavily rely on staff do cost cutting?
Early research reveals that cost cutting in 2023 will be particularly difficult due to high inflation, rising interest rates and a job market where service staff is still in short supply, meaning wages won’t drop until
there will be layoffs in the service industry.
But you can make several small changes to your small business that will keep your profitability without lowering quality or employee engagement/satisfaction.
Focusing on efficiency instead of growth will be a major theme for businesses in 2023. This is already what’s happening with tech companies due to a shift from massive growth to profitability. Smaller businesses such as restaurants, retail stores and service businesses will need to be more conservative with investments and expenses while still delivering a high quality service or product to customers so they retain their customers.
Reduce early clock ins with 52-72% in just a week (cost: $0 & 20 min/month)
Labour costs are typically 25-40% in most small businesses and many businesses can save money by reducing early punch ins. A study from 2010 revealed that a typical restaurant can save $1500-2000 per year with a simple trick. While it may not sound like a lot, $2000 per year in savings when the typical restaurant has a 2% margin means $100 000 revenue needed to turn $2000 profit/year.
Requirements: Digital or physical punch clock + paper & pen (timeplango.com is a free option if you want a digital punch clock that also includes WiFi-restricting to your location)
Instructions: Use the punch clock to record employees time reports, at the end of the week you’ll look at the reports and see how many hours and minutes employees spent before their shift started. Simply sum this time and put up a note by the punch clock or send out a weekly message to all employees stating that you as an organisation need to reduce early punches and include the amount of time the employees spent being early.
Another important step is to clarify the rules regularly, for example put up a note next to the punch clock with the time policies, for example:
“Don’t punch in early unless you have manager approval”
This will reduce early punches by 52% to 72% based on how many employees you have and how often they work.
You can read more about how to implement this in our guide here.
Train employees with customer facing positions in sales to increase up & cross-selling
When times are tough you’ll need to increase efficiency while still keeping revenue up. A good investment is to train your current customer facing staff in sales skills. Remember when you last visited a fast-food restaurant like Burger King or McDonald's and the cashier offered to upgrade your drink or add fries to make it a combo meal? These are common sales tactics not just in restaurants but across various industries. The goal of these strategies is to boost sales without investing heavily in attracting new customers. Instead, the focus is on tapping into the preferences of existing customers to drive revenue. Existing customers are more likely to try a new product and spend more, resulting in a better customer experience.
Whether your business is big or small, upselling and cross-selling can help you grow by increasing profits without stretching your budget. This article explores these two tactics in depth and distinguishes between upselling and cross-selling through examples.
Here’s how you can train your service staff to increase sales:Provide sales training: Offer training programs to help employees develop the necessary skills for up-selling and cross-selling. This can include product knowledge, sales techniques, and customer service skills.
Making stronger relationships with your customers is another way to boost sales without incurring new costs. Loyal customers are, according to research, more profitable.
Set targets: Encourage employees to achieve specific goals in terms of up-selling and cross-selling by setting targets and offering incentives for meeting them.
Role-play: Use role-playing exercises to help employees practise and improve their up-selling and cross-selling skills in a simulated environment.
Observe & coach: Observe employees during real-life sales situations and provide constructive feedback and coaching to help them improve.
Provide product knowledge: Make sure employees have a strong understanding of the products they are selling, including features, benefits, and how they compare to similar products.
Offer incentives: Consider offering incentives to employees who excel at up-selling and cross-selling, such as bonuses or recognition programs.
By implementing these steps, you can help equip your employees with the skills and knowledge they need to increase up & cross-selling in their sales interactions.
Make smart use of technology to automate time consuming tasks
Automate reporting to generate insights that will make it much easier to make your business more effective, follow the step by step guide on this website: https://bymarketers.co/how-to-build-a-sales-report-for-your-small-business-in-google-data-studio/
Save 6 hours per week by automating scheduling, time tracking and payroll - For many small businesses, scheduling, time tracking and payroll processing takes a large chunk of time for the business owner since the business usually is too small to have a dedicated admin do the work and outsourcing payroll is a costly endeavour. You can come a long way with free tools such as TimeplanGo where you can have free scheduling with digital shift requests, absence management, communication, time tracking and payroll integrations.
Automate onboarding new employees with digital tools to help educate new hires which will free up time for you. You’ll also make sure that all new hires get the same education, whereas if you do onboarding by freebasing you’ll notice cracks in certain knowledge regions due to it being difficult to plan for every event that a new hire needs to be able to cover. Instead the same standard onboarding will make it easier for you to plan when a new hire can be productive. There’s a lot of different onboarding tools but we recommend getting started with a free alternative like https://boardon.io/
Use a chatbot to answer questions automatically - A chatbot is a computer program that can automate informational tasks and or bookings. A restaurant could as an example use this conversational software to answer frequently asked questions, ask for feedback, and show the delivery status of the client’s order and show the menu, take reservations or ask for reviews. You can use a chatbot on your website and or your facebook page, follow this guide to get started.
Limit the use of disposable products and encourage customers to bring their own containers if applicable
Not only is disposable products bad for the environment, it’s also bad for your profits. Disposable products are usually less cost effective in the long term and will also make it more difficult to attract new customers since environmental effects have had an upswing in consumers minds’.
Offer deals and discounts during off peak hours
If you’re using a relatively modern POS or payment processing system you’ll be able to generate reports to see when you’ve got an objectively lower volume of customers. You’ll find that there are multiple times during the year, month, week or even day where you’ve got less to do, but you might still have the same costs during this period of time. One way to increase sales is to lower prices or add value with bundles or similar to increase demand.
Minimise food/product waste by making portions/sizes smaller
You’ve probably read news lately about shrinkflation being more popular than ever, a practice of keeping the same price but shrinking the content of a product or making it smaller. A good example is how Coca-Cola lowered their bottles from 2L to 1.75L a few years ago but kept the same price.
Buy supplies in bulk and negotiate better rates for products with long shelf lives
If you’ve got the possibility of keeping products in storage you can lower your cost per product by purchasing higher quantities.
Find new revenue streams (catering or delivery for example)
If you’ve got a business where you can innovate or expand to new business areas it can be a worthwhile effort in increasing revenue, although it can be difficult to break into a new segment and see immediate profits. It’s best to do small scale testing, if you’ve got loyal customers you can start with these and ask if they need any other services.
Identify your best performing marketing activity and double down on that and spend less effort & money on marketing activities that don’t work
If you can see good ROI on Google Ads but not on facebook ads you might want to consider decreasing or cutting the ad spend on facebook. You might also consider cutting any paid sponsorships as these can be difficult to measure the effectiveness of and you might find other channels will be able to bring more predictable revenue. There are also a few low effort activities you can optimise to increase customers without having to spend money on ads. Optimising your website and google my business page will generate more customers without adding costs. Follow this guide on how you can implement changes that will drive more customers from your website and google my business.