Have you realized you need to cut business costs and majorly trim expenses, but you’re worried about crippling your business? 😱
Don’t worry, we’ve got you covered! Our second episode in the Survive and Thrive Series focuses on trimming expenses in your business intelligently, and setting yourself up for long-term success!
Hosts Alisa Meredith and Jeff Sieh were joined by none other than Andrew English, Tailwind’s own Finance Director, to teach our viewers what they need to know about wrangling their business expenses in the short term. 💵
Watch the full show below, and scroll down for show notes, key takeaways and an awesome worksheet to help you tackle your own costs!
Watch the Full FB Live Replay
Meet Andrew English, Finance Director at Tailwind App!
Andrew English (a.k.a Andy), our beloved Finance Director dropped into this special Survive and Thrive episode for a chat about his favorite topic:
Money! Specifically, saving it. 💰
Frequently called the “James Bond of Finances” around the office, Andy has a wealth of knowledge and experience collected from over 16 years managing finances in the tech and media industries.
Before joining the Tailwind team, Andy was VP of Finance at international publication The Economist. Needless to say, if you have questions about managing your money, he’s the one to ask!
We were so honored that he took a break from hunting down expense receipts from the Tailwind team (sorry, Andy!) for this special FB Live.
Keep reading to snag actionable tips and perspective on how to go about trimming your business expenses and increasing your income.
And don’t forget to download the free worksheet we’ve created to help you tackle all those expenses right now! 💥
Tip #1: Begin By Sorting Your Business Expenses
When it comes to determining what expenses can be cut, Andy starts with a simple sorting system.
I’ve spent the last two or three weeks going down our list of vendors, listing them all out. What’s their name, how much are they, what’s the next time we need to pay them, and how much is that?
Then I’m essentially putting them into three groups: There’s the “Must-Haves“, the “Adds Value But Needs Review” and then the “Don’t Needs.” These are things we can easily do without, or are oversights that we need to do something about.
Then, he charts a different plan of attack based on which bucket a vendor falls into!
Look For Opportunities to Save on Your “Must-Haves”
You probably can’t safely get rid of your must-haves, since they’re essential to your business operations. However, that doesn’t mean you can’t look for opportunities to save some money on them!
For example, if you use a software platform based on users, does everybody in your company need a license to access it?
Even if you have to cut down seats on your software in the short-term to weather COVID-19, this can be an easy way to save some money – and you can always add them back when things pick up!
Weigh the “Adds Value” Bucket and Be Prepared to Make Tough Decisions
For Andy, the adds-value bucket tends to contain things that drive value to the business but doesn’t have an immediate impact on operations. These can look like software, a contractor, or a design resource, for example!
The tricky thing about this bucket is that there is usually some impact of cutting these expenses.
They’re often things that, if we took that away it would have a long-term impact on our business. We might not see it overnight, but you don’t just cut away at value-adders because it will impact your business at some point.
So that’s the most difficult bucket to go through, there’s a lot of weighing things up against each other.
So how do you begin making those decisions? It helps to hold two or more of the items in this bucket up against each other and figure out which one gives you the most value, saves you the most time, or delivers the strongest return on your investment.
Cut Away Your “Don’t Need” Expenses
This bucket is the easiest to tackle, and if you’re overwhelmed, Andy suggests you start here.
There’s a sense of taking control over it, feeling that you’ve done it, that it’s ticked off. It’s certainly made me feel better about the progress we’re making on the cost side, as much the amount we’ve saved over the last few weeks!
In this bucket are things that you just don’t need to spend money on right now. It doesn’t always have to be a strict cancellation of a software or service. You can also:
- Shift to a lower-tier plan
- Cut number of users
- Cancel add-ons, services and features you don’t use
- Weeding out duplicates
For example, Andy recently found three software subscriptions for running meetings, and two for scheduling them in use in the company. These are duplicates, and an easy way to cut out expenses that aren’t crucial.
Pro Tip: You don’t have to save reviewing your vendors and subscriptions for hard times. Put a note in your calendar every 6 months to review your expenses and make sure you’re spending wisely!
Tip #2: Get Comfortable Talking About Money
To get the most out of our first tip, it’s going to be really important that you get as comfortable as possible talking about money. If this feels incredibly awkward, no sweat! Use the chat function if it’s available.
Before you begin working through your first two buckets and looking for opportunities to cut expenses or change plans, outline the following very clearly. You can use a word doc, and even copy and paste if you plan on talking to multiple vendors!
Here’s what to address:
- What situation you’re in (ex: I need to cut costs immediately)
- Why you’re doing this (ex: I’m trying to save money because of this reason)
- The goal you want to achieve (ex: I need to save X amount or I need to get 50% off)
- Ask for help
When you talk to someone, 9 times out of 10 you’re going to get a better response than sending an email. Be transparent and clear; realistically, they are there trying to help.
Know How You Can Reduce Costs Without Just Asking For a Discount
In order to make it easier for both parties to find a common solution, it helps to have some options ready to go rather than just asking for a discount.
For example, can you move to a different contract, cut users, or arrange to delay payment while keeping the service for a few more months?
When you do your homework on potential solutions, you give vendors and contractors more room to find a solution that works for both of you – so the situation turns into a win-win!
Give Contractors or People Who Have Done Work Personally With You a Call
An important part of negotiating contracts and cutting expenses is preserving relationships. If you’ve personally worked with a contractor or a freelancer or service provider, you should opt to give them a phone call or hop into a video chat to talk things over.
Refer to the plan you made, and emphasize the why behind your ask.
The why is really important – it could be keeping business afloat, making sure you can provide things for your family, etc. The why is very important to communicate, because people are receptive to that and understanding. We’re all in this together.
Look for common solutions here that can reduce cost in any way that makes sense. Maybe it’s renegotiating scope of services, asking for deferred payment, or something more specific to the relationship.
Above all, be open, transparent and work to preserve the relationship. After all, this situation won’t last forever!
Tip #3: Comb Your Payments for Auto – Renewals
There’s nothing worse than forgetting about an app or platform subscription, only to see it hit your bank account at the worst possible time!
Make sure you’re listing out payment and renewal dates – and if you know it’s a subscription you won’t need in the future, cancel it now.
We have things that we pay for on an annual basis because of a discount, but we know we won’t need long-term.
If you have any of those, go in and cancel it now, for three months time or six months time…whenever it comes to an end, so you don’t get hit with that auto-renewal.
Tip #4: Read the Fine Print of Your Contracts
As we transition into a new normal of working from home, canceled events and shuttered doors, it’s important to scour your contracts for clauses that can help.
For example, force majeure clauses enable you to explore canceling contracts in the event of disaster or forces out of your control. This can free up some expenses and put money back in your pocket that you might need!
Negotiate Rent for Business or Office Space
Rent for office space, especially coworking space might be useless to you right now. If you can cancel your rent in a coworking space like We Work, explore doing that – or take the contract down to the bare minimum of seats in the short term.
It’s worth talking to your account manager, landlord or building manager for options on rent – pausing contracts or deferring payment until times are better and business returns.
Speak to Your Insurance Brokers For Any Potential Assistance
You’ll want to contact your insurance brokers or suppliers sooner rather than later for two reasons.
- Update your address so they know where you are.
- Ask if there is anything in any of your policies that will protect you during this time
For example, loss of income may be built-in somewhere, or something in your property insurance that could mean a refund or coverage of expenses.
Above all, insurance is not an expense you should cut if you can help it at all. Avoiding potential risk for the cost is worth it – the downside of major issues without insurance is so bad that it’s worth keeping it if you can.
If you do need to cut insurance expenses, first explore moving payment dates around, deferring payment or trimming parts of your coverage so that you still have some kind of safety net – even if it’s less!
Tip #5: Make a Battle Plan For Taxes
The good news is Tax Day has been pushed back for a few months. This means one of two things for you, depending on your tax situation.
If you know that you’ll owe taxes to the government, wait to file. You can delay dealing with this expense for a few months, keeping that money in your pocket when you need it.
However, if you know that you are owed a refund, get your claim in as soon as possible. The IRS is accelerating processing refunds in order to get cash back to those who are owed as soon as possible. This means you’ll get it back within a few weeks in most cases.
Look For Commonly Overlooked Deductions
While you’re examining your bank statements to identify expenses, it’s a good time to look for expenses you can deduct on your taxes.
Run your finger down your credit card or bank statement and ask, “did I use this for work? Was this part of the company rather than your personal life?”
It’s a good time to sit down with your accountant if you have one, or use the chat function on web filing services to clarify deductions and get help! If you’re working from home, can you designate part of your home as an office space to deduct on from your taxes? Can you expense part of your mortgage or rent for this purpose?
These are just some of the most overlooked potential deductions that might be especially relevant now. Bottom line, you want to get down to the nitty-gritty of your bank statement to understand what you’re spending your money on!
Tip #6: Make Your Bank Your New Best Friend
Tip #6 is the one that Andy swears by: Talk to your bank! No matter what situation you’re in, the government loans, SBA loans, etc, your bank will be your first point of contact.
According to Andy, a local bank may be even more helpful and personal in this situation than a larger bank.
One of the reasons for this have to do with SBA loans: larger banks may have already hit their limit with the government and aren’t accepting any more applications.
That doesn’t mean there isn’t money out there!
If you find yourself in this situation when exploring small business loans from the recent COVID-19 stimulus packages, talk to a local bank before you give up. More than likely, they’re happy to help you get set up with an account and work with you – and are less likely to have already hit their limit.
Grab the Worksheet to Evaluate Your Expenses
Ready to evaluate your expenses and start saving your money? The FREE worksheet below will get you started!
Need more business resources as we navigate the COVID-19 recession together? Stay tuned to our special Survive & Thrive series every Tuesday on FB Live for more expert advice and handy worksheets! 😍
Have a burning question on cutting expenses or negotiating with vendors? Leave it in the comments below – we read every one!