Cutting Costs in a Crisis

Small businesses across the country are feeling the strain that comes with a global pandemic. Business models have been disrupted, and cash flows have taken massive hits. The coronavirus has left a lot of business owners and their employees scrambling. Regardless, in this tough time, there is one thing every business owner (and employee) should not do: panic.

Panic causes far more problems than it solves. Panic is an emotional response, and when you make decisions — particularly business or financial decisions — based on emotion, you are more likely to make a mistake that negatively affects you in the long term.

A recent Goldman Sachs survey of more than 1,500 small-business owners revealed that more than 50% believe they will be out of business within three months if the situation doesn’t improve. In order to survive, cutting costs is necessary. The biggest cost many businesses are addressing is that of their employees.

Over the past few months, many businesses have let go of part or all of their staff, opting to lay them off rather than absorb the financial burden of keeping them on. Laying off workers can prove to be a good strategy, but only if done correctly.

Start the process by extending invitations to your now-former employees to possibly return once your business can support them again. While they can now collect unemployment benefits, you need to think about where your business is going to be after the major situation is resolved. At that point, you can do one of two things: Rehire previous staff or hire new staff. Keep in mind that hiring new staff members will cost significantly more than rehiring your old staff. Consider costs associated with retraining, establishing benefits, and getting them up to speed.

Also, do not discourage former employees from pursuing other options. While you may be in a position to rehire some of your prior staff, you may not have the budget to rehire everyone. Everyone needs to be able to make ends meet.

In the meantime, keep an eye on government relief. Many small businesses will qualify for certain assistance in the coming months.