It’s never been a more expensive time to run a business. Inflation is up, prices of supplies and services are soaring, and labor is becoming increasingly expensive. Pair that with the dismal economic outlook, and many business owners are left wondering how they can cut costs.
And who can blame them? Inflation has hit a 41-year high and currently stands at 9.1%. Although many experts believe it has peaked, the ramifications on the consumer price index and other critical economic markers have yet to be fully realized.
Pennsylvania business owners aren’t immune to the effects of inflation or the lingering staff shortages caused by post-pandemic growing pains. In fact, the state has enjoyed astounding GDP growth while experiencing a decrease in employment. From 2010 to 2020, Pennsylvania’s GDP grew by 27.64%, yet its non-farm workforce shrank by 0.68%.
Something’s got to give, and many believe a recession is imminent. But, when it comes, will your Pennsylvania business be ready? Cutting costs is a great way to prepare for economic turbulence, and here are a few things you can do to save money now.
Tip #1: Reevaluate Your Insurance Coverage
Pennsylvania business insurance is a considerable expense for most employers. Most policies range from several hundred to several thousand dollars a month, but do you know what you’re really paying for?
Although being underinsured is a problem for many businesses, being overinsured is an issue, too. To make sure you’re not paying too much for policies you don’t need, get familiar with the kinds of business insurance and how they can help your company.
General Liability Insurance
No matter your business, it’s hard to dispute the necessity of general liability insurance. These policies act as an umbrella, always covering your business when the unexpected happens.
General liability will protect your business from property damage, bodily injury, advertising harm, court and legal fees, and even medical costs. This policy is a must-have for every business.
Workers’ Compensation
This type of insurance is required by Pennsylvania law, and for good reason! Workers’ compensation insurance protects you and reimburses your employees for accidents causing bodily injury. In addition, with workers’ compensation, you and your staff can be repaid for costs incurred during medical treatment, lost wages, retraining, and more.
Professional Liability & Errors and Omissions Insurance
This is one of those types of insurance that depends on what you do and how much protection you want. Although typically used for professional services like offering legal counsel, accounting and financial advising, and providing medical care, there are other cases when professional liability or errors and omissions insurance makes sense.
Let’s face it—no one’s perfect, and everyone makes mistakes. And when you do, these policies ensure your clients can sue you. But unfortunately, errors happen, and if a customer files a lawsuit due to an error or omission on your part, this policy ensures your legal fees are covered.
Tools and Equipment Insurance
What does your business need to operate? If you provide an on-site service, like construction or lawn care, your business probably owns quite a few tools and pieces of heavy equipment. But if you’re a financial advisor working from home, the only tools and equipment you need are standard office supplies.
No matter what kind of business you have, tools and equipment insurance is a policy that protects your things if they’re damaged, lost, or stolen. Obviously, this type of coverage is far more critical for businesses with a lot of expensive equipment, so carefully consider whether you need this policy or not.
Commercial Property Insurance
Commercial property insurance protects the place where you do business. That could be a rented office or even a space in your home. The important thing to know here is that standard homeowners’ and renters’ policies won’t cover your home office if it's damaged.
So if a fire damages your home, your personal policy won’t reimburse for any damage to the home office, including replacing the equipment. This is why commercial property insurance is so vital: it covers the property and what’s contained therein, no matter where you work.
Commercial Auto Insurance
Do you ever drive for your work? If so, do you use a fleet vehicle or a personal car? Either way, you need commercial auto insurance. These policies work the same way as commercial property policies.
If you drive for work, you should have commercial auto insurance to protect you if you’re in an accident. If you don’t do any driving for work but currently have commercial auto insurance, get rid of it and save some money!
Hired and Non-Owned Auto Insurance
Some businesses, whether they have fleet vehicles or not, occasionally require rental vehicles. Hired and non-owned auto insurance covers companies similarly to commercial auto insurance, except for rented cars.
If you never have and don’t plan to rent a vehicle for your business, then you don’t need hired and non-owned auto insurance.
Tip #2: Shop Around
Commodities prices have soared in the last two years. And the result is higher costs of supplies and services across the board. When was the last time you revisited your costs and tried to negotiate better rates?
Talk to your suppliers and ask about their best available rates. Remind them of your loyalty and the amount of business you provide annually. Many companies are willing to give a discount to keep good customers happy.
And don’t forget to shop around for services, too. Credit card processing, for example, is a significant expense yet is usually negotiable. You can also shop for internet rates, mobile phone plans, utilities, and cleaning services.
Tip #3: Reduce Payroll Costs
No one ever wants to cut payroll, But if you’re in dire need of cash, it’s something you have to think about. Fortunately, a way to do it doesn’t require you to lay off staff. Instead, cut the Friday workday in half to save a quick 10% on your labor costs. Then, let your team out at noon that day to give them a 10% shorter workweek, and save you 10% on the payroll.
If you need to take more drastic measures, consider cutting your pay before eliminating any positions. If you can take less to keep valuable staff employed, think about it before pursuing layoffs.
Tip #4: Inventory Equipment
If you have valuable equipment lying around, have you ever thought about selling it? Businesses invest thousands of dollars in tools and equipment—even office equipment—over the years.
Usually, you replace or upgrade things long before they break. So selling retired legacy equipment, you aren’t using anyway is a great way to make extra cash and tidy up your office. And selling used equipment instead of throwing it away is better for the environment, too!
Tip #5: Market Smarter
What is your current marketing strategy? Do you use an expensive ad agency to optimize your search engine, pay-per-click advertising, and social media? Many companies do, and lots of them can save money by keeping those functions in-house.
You can also shift your marketing focus to free advertising opportunities and those that provide the most significant return. Evaluate your click-throughs and conversion rates before drastically changing your marketing play.
Cutting costs and saving money for your business is never a bad idea, especially in the face of a looming recession. Use these tips to reduce your operating costs and be prepared for anything that comes your way!
