5 HIDDEN Expenses That Could Sink Your Business!

Hey, everyone, it's Mike, and you're listening to the Business Boot Camp podcast. Today we're going to be talking about the ways you can cut expenses, cut the fat, save money, and make sure you get through and survive in an economic recession like we're in right now. Before we get into the show, a big thank you. Today's sponsor, which is Gusto. Gusto wrote me and they wanted me to let you all know that while COVID 19 is having unprecedented impact on the economy, the companies like Gusto are still building tools to support your business and your people through the ups and the downs. And I can say this inequivocally because right now you should have already applied for the PPP program as well as the Eidl program. These are government assistance for small businesses, and if you haven't, make sure you do that. But in that you need to submit payroll reports, and if you've been doing it in an inefficient manner, this is the time to try out gusto. You got 3 months completely free as part of the they're offered to us as listeners. And so check it out today. Go to gusto.combootcamp make sure that you can easily download things like your quarterly reports and your payroll summaries. Check it out today. Gusto.combootcamp all right, so I know the majority of my outlook on this whole downturn, recession, coronavirus thing that's happening is, you know, from, from an economic standpoint, this Business Bootcamp podcast, this is not a health podcast where we would be talking a lot more gravely. But in terms of overall, my impressions of what this economic contraction is going to be and the impact it's gonna have us on small business owners, I generally look at it as a very positive long term thing. I know there's a lot of pain. In the short term, I'm feeling the pain. I'm sure you're feeling the pain. But I feel like the people who have built their businesses correctly are going to come out massive winners on the other side of this. And if you look at the great wealth generating years of individuals that have really expanded, it's usually the years right after a contraction, right after a recession. The people who have built their business to survive through a recession, they're the ones that on the upswing, just absolutely scale their business and really take it to the next level. And so I'm looking forward to it. I think it's a positive thing. I think it takes away a lot of the people that have been faking or the people that have been building their business incorrectly or building it as a facade instead of an actual structurally sound company and financially stable. So that's kind of, I see it from a very positive perspective. However, that being said, it does not take away from the fact that you need to survive this time and go on like all out survival mode in your business to make sure that you are able to get through this time of economic contraction, get through this time when money is not walking in the door and customers are not always calling you and you don't have a massive waiting list. And no longer is it a problem of trying to find good people. There's a ton of unemployed people ready to work, but you don't have the work to give them. And so literally in a matter of a few weeks, everything changed. So I am not a pessimistic or a fatalist in any way, shape or form. However, during this time, you got to make sure you survive financially. And whether this is three months, four months, five months, a year, two years, whatever this is, we have to make sure that we get through and survive this time. So I'm going to go over five different ways that I have thought of that you can cut the expenses that you do not need, cut the waste in your business to make sure you become more profitable and to make sure that you get through this time and you survive. All right, number one is inspect what you expect. I know we've all heard this, it's very cliche, but you must inspect what you expect and micromanage your finances. If you've allowed someone else to be doing the finances, great. That's usually the first thing we as owners and entrepreneurs like to delegate is the bookkeeping. That's great. But this is the time for you to get your hands dirty and micromanage the finances. And maybe some people don't like it, maybe you step on someone's toes, but this is your business and you have to take control of it. Right now you have to be really looking at every single expense and figuring out whether or not you actually need it, whether or not this is something you can delay, defer, push down the road, or whether you can cut it altogether. This is the time to inspect what you expect. I expect that I have clean books. I expect that we don't spend money when it's unnecessary. But this is the time I'm definitely going to inspect those things and make sure that we are tight on all those areas. I don't feel like there's a ton of waste in my business in Terms of where we're just frivolously spending money or spending money, that's not really necessary. We're usually pretty tight in general and I usually keep a pretty good eye on things. But this is the time I'm going to double down on it and I'm going to make sure I literally micromanage the financial department of the business. Number two is you need to increase your asset utilization. What that means is instead of having a truck that gets used four days out of the week, make sure it gets used six days out of the week and therefore use less trucks. Alright, if you have a factory for example, and let's say you have three factories, maybe in the past you have done where there is one shift and you have eight hours, eight hours and eight hours. So a day shift at all three factories, well, maybe this is the time you go to one factory, but you run all, all day and all night, 24, 7, you do three shifts at one factory, increasing the asset utilization. In other words, if you have fixed costs, where can you make sure you get the most productivity and the most output from those assets? So if you have trucks, if you have equipment, if you have office space, if you have any sort of machines or things that you use in your business that are only being used at 40, 50, 60% of capacity, and you have multiple pieces of that equipment, or multiple offices or multiple places that you're renting, this is the time you need to increase asset utilization. Increase asset utilization and then the leftover is waste. So if you have those three factories or you have those three trucks, or however, whatever example you want to use in your business. But let's say for those three factories, if I'm able to take this, I'm able to output the same amount of work, the same amount of productivity by taking those three shifts that used to operate from 8am till 4pm across three different factories, I'm able to sell two factories and move it all into a 24, 7, 3 different shifts on one factory and sell the waste. So if you have trucks and you at this time you're like, okay, I'm going to make sure I am utilizing these trucks as their max capacity. Every single day they're being used. Instead of them sitting around, I'm going to make sure I'm utilizing them. If I'm not, I'm going to sell the waste and get rid of the excess. That's number two. Number three, cut off dumb marketing. When times are good, money is flowing, it's easy to get caught in the trap. Of just spending money on marketing in anything because there's return on investment, because people are willing to spend money. There's a massive demand for your product. And regardless of where you spend the money on the advertising, there's people that are, it's working like, it's not like not working marketing, it's literally marketing that is working. But in times of economic contraction now it becomes dumb marketing because you could spend money all day long, but because there's no demand for the product in the way that you're pushing that marketing venue, you could be absolutely losing money. And so definitely I think this is the time to double down on low expense guerrilla marketing tactics. I don't care what that means. For some of you, it might mean going door to door. You can't be doing that right now if you're under a stay home order. So it might mean waiting until you, you're allowed to and then just like hitting that really hard. It might mean doing something like Facebook groups, going to local Facebook groups in your local market, using nextdoor, going online, finding pockets of your customers and making sure you can connect and interact with them. Things that take more time instead of money. Right now if you have people laid off, if you're not as busy, if you've had to close your doors, this is the time that you have time and you don't have money. So what you need to do is focus on those marketing channels that require time, but not a bunch of money. Because right now the money thing, like we're on a burn rate right now, we don't know how long this is gonna last. And so you want to conserve your cash and now that you have time, utilize the time to do things you would otherwise not have time doing. So instead of spending a bunch of money on Facebook ads or on Google Ads, or just funneling money into some marketing channel that used to work in the past. Now it might not work because your customer response rate is going to be so low due to the fact there's such low demand. So what you need to do is spend time to actually go to your customer online, go to your customer, wherever they may be, and make sure you actually are in their front of mind for your customer, whether it be online or in person. Alright, so that's number three is cut off dumb marketing and double down on low cost and guerrilla marketing efforts. Number four, you got to take a really hard look at recurring expenses and subscriptions. It's very easy, both in your personal expenses as well as in your business financials to just allow Recurring expenses to pile up. Little stuff, little subscription, $10 a month, $5 a month, this SaaS product, this CRM product, Spotify and then you got Mailchimp, and then you got this other email plugin and then you got this email.

Corresponder. Just so many different things you can buy. And all of us as business owners, usually we utilize like 10, 20, 30 different types of software products. One time I wrote it down, I was using over 40 software products that off the top of my head I came up with. Some of them are subscription based, some of them are just things I use like Facebook or Instagram or like social media, but like massive amounts of software that we all use. And a lot of those things are monthly subscriptions. Other things, like recurring costs. Are there recurring costs in your businesses that you're utilizing? Like do you have a company come in and fuel up your trucks? Well, maybe now is the time to allow your guys to fuel up the trucks because you have less business and you'd rather pay your guys and keep them on payroll than you would having some other service come in. Maybe this is the time that you got to take a look at if you have another service coming, a subcontractor coming in and washing the uniforms. Like maybe the time, this is the time you have one of your crew do that. Maybe this is the time that you take cleaning your offices in house instead of subbing that out. These are all recurring expenses and things that are costing you every single month. That in times of prosperity is a good thing to have. But when money's tight and we need to be conserving our cash reserves, this is the time you might have to start cutting out some of those subscriptions and those recurring expenses. Number five, perhaps the biggest one is looking and taking a hard look at your rent, your mortgages and your loans, any sort of equipment loans, rent on your property, your offices, if you have a mortgage, if you've bought a building or you've bought real estate, or you've bought a business with an SBA loan, whether it be 7A or 540, whatever it is, regardless of what loan, mortgage, rent. This is the time to be asking yourself like should I go get forbearance? Should I get it deferred? These are questions you got to ask yourself and know that down the road this is something that's a gray area right now is asking for forbearance on your mortgage, your home mortgage, for examp whether that's going to be held against you down the road. And so this is not something you want to ask first but I would definitely take a look at the things like equipment loans for these companies. They'd much rather you just get a couple payments deferred than they would you go under on a 40, $50,000 piece of equipment. This is the time to get humble. Ask those lenders, ask them for payment terms, ask them for deferral, ask for those three months of payments to be put at the end of the term. You so if you have a three year piece of equipment you're paying off over the course of three years, ask hey, can I get the next three months? Just put on the end of this three year term and just get it deferred. These are things like you can do and you'd be amazed at how flexible some of these lenders are going to be because they'd much rather have you, a customer that's been very consistent paying, they'd rather keep you than say no and potentially have to go into coming after that piece of equipment or foreclosure or a loan being terminated and being redone and going back to the bank. So these are things that they do not want to get involved in. If you get to the point where you need loan forbearance or you need deferral of your payments, this is something you're going to have to be humble about. You're going to ask people for and trust me, they're going to be more flexible than you could ever imagine because they'd much rather get the money from you even if it's 50% for the next three months. These are things you can ask your landlord, you can definitely ask equipment providers and your vendors. These are times to make sure that if you've had good relationships with your vendors, if you've had good relationships with your banker, this is the time that you can cash in on those things and ask for favors. Now I want to go over a couple things real quickly that you should not be trying to cut on when it comes to cutting expenses. And these are just my personal opinion, all of these are my personal opinion. But in my opinion opinion, the last thing you should cut, the very last thing in terms of expenses that you should cut is employee wages. In my mind that's the last thing you should cut. Like don't go under without doing it. But that should be the very last thing you cut is employee wages. The reason for that is because you should have exhausted every other avenue of reducing expenses before you start cutting people expense cutting your employees wages. In my opinion, you should have cut your wages you should have asked for a loan, forbearance. You should have tried to sell off equipment. You should have cut off your marketing stuff that's not working. You should have taken a look at your subscriptions and all the things we mentioned before. Like, way before you resort to cutting your hourly wage of your employees, you should be doing all those things that should be last resort. I wouldn't touch that first. If you do that before cutting these other things, you, your employees will never look at you the same. And when economic prosperity comes back and there's plenty of, you know, everything's kind of gone back to normal and there's a massive shortage again of labor, they're going to have options. They're going to leave you if at this time when they need you most, you cut their wages first before doing a lot of other things that they, by the way, see as waste. The employees are some of the best detectors, the best sniffing out of waste in a business. And if they don't see you attack those areas first and they see you go after their wages before you go after waste in the business, I promise you there's gonna be a level of distrust created and they're going to leave when the opportunity comes down the road. Another thing I would not reduce is your marketing spend if you have the money. And I talked about cutting out dumb marketing, but you need to double down on the things that are working, the channels that are working, really be able to exploit the fact that none of your other competitors are spending money either. Like, marketing is the first thing to get whacked when it comes to a budget during economic contraction. The first thing big businesses do is just like wipe marketing off the table because they're trying to do a whole bunch of other stuff because revenue just got plummeted. And so when they pull out of the market, when they pull off of Facebook, when they pull off of Google, when they pull out the local newspaper, by the way, you might have a massive opportunity to get great. Either a PR story here or you might be able to get a great ad product that usually might cost $1,000, you might get for 200, because there's literally no one advertising in the newspaper and they need marketing dollars like never before. And so this might be an opportunity to go after those places and get marketing for pennies on the dollar and double down on the things that are working. Okay, so yes, cut out the dumb marketing. But when there's areas that you channels that's working, I'm gonna double down on it. I'm not gonna necessarily reduce my spend on marketing. If I can afford it, I'm going to put that money towards the avenue. It's gonna give me the best returns and are gonna give me higher returns that I ever would have seen when times were good and I was competing against every other one of my competitors in that channeling market. Alright, so these are the things I'd be thinking about. This is the time to survive. Get through this time and I promise you we'll come through it stronger. And if you can survive, you, you will thrive in the next upswing. Listen to Mike Ades on the Business Boot Camp podcast. Until next time. Be great, because nothing else pays.