• A difficult economic environment calls for sacrifices to make ends meet
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Charlene Bahati, a restaurant owner at the Coast, is the manager, chief chef, cashier and waitress at her establishment. Due to the rising costs of business, she let go of several employees and took up their roles herself.
She has one employee left with a rather wide job description. He is the cleaner, waiter and assistant chef. The employee sleeps in a room within the restaurant's compound. Being the only person who spends the night in that compound, he is effectively the night watchman.
"Business expenses are rising but I can't raise my prices because customers will run away. The only thing I could do was cut down on the number of workers," Bahati says.
Three years ago, Bahati had two full-time waiters in the restaurant and a watchman. From time to time, she would hire temporary workers whenever the need arose. Those days are now a fading memory.
In business lingo, Bahati has cut down on labour costs. It was painful to have to let some people go, but the alternative was to watch the business collapse because of ever-rising expenses. With the prospects of getting a job not showing any signs of improvement, Bahati had to save her main source of livelihood by making tough decisions.
What other measures can entrepreneurs take to survive a difficult economic environment?
1. Control your spending: Employees can misuse business assets, resulting in waste. Employees with the authority to spend on your behalf can engage in fraud at the expense of the business. Have a set of guidelines, activate spending limits and monitor your monthly financial reports to help you save money and avoid losses.
2. Ask for discounts: Depending on how much you buy, your suppliers may have quantity discounts. You may be able to meet these requirements and qualify for a lower price. To find out, ask about discounts and what you need to do to earn them. You may get anything from an interest-free loan in the form of supplier credit to a healthy discount for paying early.
3. Collect cash in advance: When offering goods or services on credit, consider collecting a percentage of the cash up-front with every purchase. This will help your business reduce risk, improve cashflow and save money in collection efforts. For example, you can impose a 25 per cent advance payment before supplying on credit.
4. Consider bundled services: Some companies offer bundled services, such as when a TV subscription and Internet are combined in one package. Typically, the price of a package is lower than if the customer bought each of the items separately. Take advantage of bundled services from the same company to save money in your business.
5. Electronic invoices: E-invoicing is the issuing of invoices by email directly to your customer. You can reduce your business' print and delivery costs if you begin sending invoices electronically.
All businesses benefit from cost-cutting measures. Don't wait to get into a crisis before you start watching your business expenses.