How to manage expenses if you're a small business owner?

 

 

Hi, it's Danny Valencia here with My City Nest powered by Keller Williams and today I want to share with you 4 great takeaways, I took away from a training last month on how to manage expenses if you're a small business owner. Now, the reason I want to do this of course is because the current COVID 19 and what that means to the economy, we're going to see a lot of small businesses go out of business. We've already had a couple of suppliers reach out to us and let us know that unfortunately they're not going to make it at the other end of this. So this is my way of giving back to the business community and a lot of what we're going to be looking at today is going to be from the book shift. If you haven't had a chance to read this, I'd definitely recommend that you pick up a copy.

Most successful business owners will say that a shift in the market is one of the best things that can happen to your business. Now, I know that may not feel that way right now, because of the concerns of the downturn and the economy. But what I'm going to say is that if you can pivot quickly and the business that do pivot quickly are the ones that are going certainly going to have market share at the end of this and in 18 months or 24 months or however long this is going to be. All the businesses are going to look back and actually see that they're going to have much more customers.

So, the first thing I want to share with you is Get Real. Now what does that mean? Well, quite simply it means acknowledge where you are at the moment and where your business is.

Cause I've spoken to quite a few people and they feel that this may just take a few weeks or a few months. Now I hope that they're right, but we don't know. We can only know what's happening at the moment. None of us have a crystal ball. So, acknowledge where you are at the moment. If you, most of you would have a business plan for 2020, I will say is take a another business plan just looking at every 90 days from now on, because ultimately we don't know how things are going to be progressing and how they're going to change. People most responsive to change are the ones most likely to survive and thrive. So get creative. Think out the box. I mean, it's amazing what I've seen, businesses throughout there, whether you're a personal trainer, doing zoom calls in the morning and getting families, with their healthy exercises or whether it's restaurants and bars and happy hours and getting the community together.

Just think out the box. There's so much creativity that's out there. You may be a business thinking, well actually because of the nature of my business, nothing I can do. Call your clientele, call your customers. Maybe there's another segment in the market you can be servicing. So just get creative. Think out the box.

You can't revenue your way out the shifted market. A lot of people feel that we can make a more, much more sales in a shifted market. And we could revenue our way out. And the truth is you can't, it just takes too long. The number one determinant of a thriving market is making more sales. And yet when we're shifting from thriving to surviving, the only way you can do that is by expense management. So that's what we're going to be looking at right now.

Here's the thing, when it comes to expense management, this is something that should be doing at least a couple of times a year anyway. But if you're not doing it, this is a great opportunity for you to sharpen the saw and make sure you get into the habit of doing it. And I'll tell you what, you're just going to be so much better off when you get to the other end of this because you're just going to be building that habit of expense management and just making sure that you're as lean as possible with your business. And a second thing I want to share with you is take action. So once you've got your mind right, the second thing you're going to do is just take action on what that looks like for you can be different depending on the size of your business. So the first thing you're going to do is you're going to get in touch with your financial team. So that includes your bookkeeper, your accountant, operations director.

Again, it really depends on the size of your business. Now what you want to do is you want to get hold of your P&L. if you don't have a PNL, then at least gets a printout of your three months bank statements of your business credit cards and any other source of income of outgoings that you may have and print that out. And you're going to categorize those expenses A, B, and C. So A is going to be anything that you can do without. That's the very first expense. I mean within 24 to 48 hours after the watch, this video cut those expenses. This could be anything from apps that you have a put in for your business. It could be subscription that you no longer need. Now category B, would be those expenses that you kind of need, but you can do without if necessary.

Now what I will recommend is that you reach out to these businesses and these suppliers and just put it on pause. I mean, if you really need it further on, you can always reach out to them and believe me, they're going to be more than happy to take you back on board. And if you feel that, actually I'd like to keep it for now, then move anything that's fixed to variable, give yourself permission that if you do find yourself in three, four months down the line, not hitting those sales that you need to hit or that income to be able to survive, then you have the flexibility of just canceling that and you're not in negative income.

Category C, are going to be those critical expenses that your business simply cannot do without. So, of course you want to keep those. You don't want to look at your business six months from now and find out that you haven't got a running business because you've cut all those critical expenses.

But one thing I will say is reach out to these businesses and at least if you can move them from fixed to variables so you can give yourself permission to cancel them in round about three months if necessary, but also see if you can negotiate new terms with them, new prices and another thing that I'm going to say is look at alternative, there's so many alternatives out there to current expenses that we have and current providers and suppliers. It's amazing if you do some research.

Once you know which expenses you're going to keep. Would you want to be looking at is looking at your lead generation and marketing expenses and you want to make sure that you get in an ROI (Return On Investment) of at least 4 times. So for every pound spent, you at least getting four pounds back because if you're not getting that return, then what I recommend you cut that out and only keep what's really giving you a return on your money, especially in these critical times.

Another thing is timeframe. If any of these expenses isn't going to give you money back within the next 30 to 90 days and as opposed to six months or 12 months from now, I would say anything in any marketing activities like that, just put it on pause, put it in pause for now. Just make sure that you're spending money on those critical marketing activities that's going to give you a return on investment as soon as possible.

There is a lot of government support out there, so yes, make sure that you are up to date with all the information that's out there, whether that's Deferral on VAT on your taxes, whether that support for salary for yourself or your employees, or whether that's even an interruption loan from the government.

Just make sure you have all the information so you can make sure that you're making the most of it. We'll share a link on this, quick blog as well. And once you've got your mind right and you've managed your expenses, then the next thing you want to be looking at is your people, of course. Now for most businesses their people their staff is perhaps going to be the most expensive investment that they have in their business. And I'll say investments because that's exactly what they are. They're there for you and you're there for them. And as a leader you want to make sure you have great communication with them. So make sure you're making use or some great communication tools that are out there such as zoom and getting your team together if possible on a daily basis. You want to make sure they're feeling safe and that's your responsibility as a leader.

Just make sure that all hands are on deck. Make sure you've been transparent with them, and if there is a need for you to cut wages of salaries in the next 30 60 90 days, just make sure you are open about that and lead by example. If you're going to be cutting salaries, then made sure that perhaps you're going to take a salary can't work as well. Another thing is before letting people go, if you do need to let people go, think out the side of the box. What other activities could these people be doing that they weren't doing before, but perhaps there's some great opportunity in the business now for them to do now and perhaps have them on a performance results instead of having them on salaries. So again, I'm not going to go into technicalities or perhaps even what the, what the legal guidelines are in that, but just think outside the box and make sure you're having good communication with your team.

And lastly, you're going to look at your personal expenses because if your business is going to be making less money, then it's very likely you're going to be making less salary. And therefore it just makes sense that you look at your personal expenses as well and see what you could cut out. As the same kind of method you're going to print out your bank statements, credit card statements, take a highlighter. I know may not be fun. You're going to go through each line of them and just to ensure what's in there. That's absolutely critical that you need to keep, which is fair. Make sure you reach out to them anyway and look at what's not critical and look at what's there that actually you don't need. Then you've just had a notice and you can just cut out and save a ton of money, so just make sure you look at that thoroughly as you did with your business.

so I hope you find this video helpful. Before I let you go, what I'm going to say, I'm going to challenge you with your business to at least see if you can cut out a £1000 on your business expenses a month as a challenge worth doing. Let me know how you get on. If you have any questions, let me know. What I will be sharing on this video is a few links, as I said, government support, which may be very helpful for you guys and if there's anything else that we can help you with, just reach out Danny Valencia here with My City Nest powered by Keller Williams.