Cut costs
It sounds simple, but reducing costs is a surefire way to save on spending and quickly make sure your business is more profitable. It’s important to consider where you can make changes without negatively impacting customer experience, operational efficiency, or employee morale.
Here are some things you could do to try and cut costs:
– Renegotiate contracts with your suppliers
– Move offices or reduce office space
– Cut back on outsourced work and projects
– Automate processes
– Use lower-cost materials
– Regularly evaluate business expenses
– Cut out ineffective marketing activities
Running a business when times are tight is a little like playing poker, in that you need to know when to raise the ante and conserve your funds. Making cuts in the right way and investing at the right moments (more on that below) is an excellent way to keep your business afloat and even try to drive growth during a period of instability.
Full-service digital agency CTI Digital builds world-class digital solutions and campaigns for global brands. For them, harder times can provide a good opportunity to take a holistic view of your business to improve efficiency and processes.
“When the economic road gets a bit bumpy, it’s a great opportunity to look at your business and trim the fat,” explains Michael Ashworth, commerce sales director at CTI Digital. “Review the fundamentals, and make sure you are getting the best possible rates from your partners, whether that be payments, shipping or product suppliers. Look at your analytics and understand what digital marketing activities are really driving your orders, so you can prioritise spending on the areas that move the needle and cut back on areas that don’t.”
Upgrade your tech to save
Nowadays, a wide range of tech is available to businesses of all sizes at a fraction of what it once cost. The rise of SaaS and other as-a-service and on-demand models has given even the smallest companies the ability to harness the power of technology to improve customer experience, streamline operations, and add value across the board.
But can improving tech really make that much difference? Well, one study found that almost 75% of business leaders think machine learning and AI can make organisations more efficient, and expert economists theorise that times of economic downturn, when demand lessens and there’s less pressure on your business, can be the best time to level up your tech.
So, how do you put that into practice? Working in ecommerce, it’s worth reviewing your tech stack to determine where there are inefficiencies, what can be improved, and what’s missing. That might mean automating activities so you and your team can focus on higher priority projects or switching to a new partner more suited to your needs.
As it’s our expertise, let’s take payment service providers (PSPs) as an example of this. Working with a PSP can be a great way to reduce costs, as you pay less in transaction fees than you would if you had contracts with each individual payment method provider. If you already use a PSP, switching to a new provider could help you offer all the payment methods you need at a lower cost and even access other features and benefits that can improve your business.
Go international
It might sound counterintuitive, but moving into new markets can be a great way to insulate your business from tougher economic conditions. Here’s Mark Elward, chief commercial officer at award-winning order fulfilment firm Huboo, on how it can help.
He says: “It might seem counterintuitive to consider entering new markets as the economic situation worsens across Europe. However, it really is one of the best ways to secure your business, spread risk and tap into new audiences. This means that you’ll be in a strong position to cut your costs and spend, all while being ready to seize the day when the financial circumstances eventually improve. Your sales may well be dropping off, but perhaps your core products are well-suited to a particular, or rather more niche, overseas market.
“It’s important to think creatively about reaching out to new audiences in order to drum up interest and commercial movement. This is why venturing into previously uncharted territories presents a strategic way to do so. Now could be the precisely right opportunity for ecommerce companies to capitalise on nascent pan-European and global sales opportunities.”
Think about shrinkflation
Another good way to help your business through more challenging times is by considering ‘shrinkflation’. This means saving money by delivering less for the same price. Of course, customers might not be happy to see a product they like change but can prefer this to paying more. This leads us into our next tip…
Evaluate your pricing
Upping your prices is never easy, but it can be an effective way to remain profitable when costs are increasing and spending is down. Assess what your competitors are doing and the market to find a price point that won’t adversely affect your profitability.
A good repricing strategy is one that doesn’t upset your existing customers or deter shoppers from making a purchase. Plan to make adjustments gradually to test what works. You can try these things:
– Start by only increasing the price of your most in-demand and high-margin products
– Offer incentives to increase conversions, such as free shipping or gifts
– Add value by improving customer service and support
– Change your marketing tactics to attract less price-conscious shoppers
Another thing to consider is how you communicate pricing changes with existing customers. Remember to always use active language when talking to them to show you’re taking responsibility for the changes and explain the reasons clearly (we’re increasing prices due to XYZ).
Mollie customer and organic lingerie firm We are Jolies take a holistic view of their business during more challenging times to make savings and improve what they do.
“When times are tight, we produce fewer products to avoid too much storage in the warehouse and centralise factory orders to avoid having to finance carriers too often,” explains Eva Daniel, the firm’s web manager. “We also pay attention to the recruitment of new employees and when possible favour trainees. We’re also thinking about the day-to-day and are considering moving to a 50/50 office-home hybrid way of working to reduce costs.”
Spend your cash
Liquid assets like cash can be a great source of comfort to a business owner. After all, having a good amount of money in the bank helps you know you can keep paying your bills and deal with any financial emergencies. But cash is not king in times of high inflation, as prices and costs rise while your cash sits in the bank.
So, if you’re thinking of buying assets or investing in stock, act quickly. Put your money into short- or long-term assets before prices and interest rates rise to ensure you’re not paying over the odds. Just remember to keep enough cash for emergencies and liquidity.
Review your marketing
If you’ve been using different marketing channels to sell, now might be the time to review what’s working best or even try new things.
One key thing to dig into is the ROI of each marketing activity. Have you assessed the rising costs per thousand impressions (CPM) if you’ve been using social media? Or perhaps your email marketing campaigns aren’t connecting, and you need to change things up or save money by ending your software contract (and rerouting the money into more profitable projects).
To do this as effectively as possible, you need to work in an agile manner, which leads us to our next point…
Innovate
Blue-sky thinking isn’t always the best solution when you’re feeling the crunch. But it’s also worth pointing out that some of the best ideas are born when times are tough. And that some of the world’s biggest brands launched during times of recession.
Taking a holistic view of your business is an effective way to make small improvements quickly. One way to do that is by taking a more agile approach to innovation and using a growth mindset to drive success.
What does that mean? Essentially, you can start by doing these things:
– Learn to embrace failures and learn from them
– Running small tests to see what works – then scale successful activities
– Operationalise learning across your business
For more, check out our guide on adopting a growth mindset.
A growth mindset case study
Let’s look at digital marketing platform Internet Marketing Unie (IMU), an agency that also offers software solutions. The firm employs 40 people and has more than doubled its revenue in the last three years alone.
IMU co-owner Martijn van Tongeren says: “A growth mindset means continuously learning and looking for the best way to drive growth. That means not always taking the easy option. Focus on the right sources of information, and see how you can use those to help the business develop and adapt.”
