- January 23, 2021
- Posted by: Morgan Ayres
- Category: Cafe, Restaurant, Retail
How to Reduce Expenses in Your Retail Store, Café or Restaurant
The pandemic has challenged the hospitality and customer service industry more than any other event in history. With lockdowns and partial to full-closures around the country, now more than ever is the time to re-evaluate your business expenses and make strategic decisions. Even with the news of a vaccine on the horizon business will not be back to normal for the majority of 2021 and potentially could change for even longer. Companies must look for as many ways as possible to reduce discretionary spending. Next to labor costs, the top costs for businesses can sometimes be those recurring expenditures for goods and services. Thus, the key to the biggest cost reduction is to reduce or eliminate some of those recurring expenses.
There are some ongoing costs that the business must incur, of course, however some are maybe adjustable or negotiable. Suppliers are open to keep your business and help where they can.
Here are some ways to maximize your business expenses, reduce your recurring costs and improve your bottom line.
Start with a Plan!
Before you start negotiating price reductions, take a detailed list of your recurring charges. Some of your needs may have changed over time. Create a detailed list of what expenses you have from your credit cards and bank account and strategize where to start to make the biggest impact.
Negotiate with your Service Providers for Lower Prices
This is sometimes the quickest and easiest way to reduce recurring expenses for things like office phones, mobile phones, wifi services, televisions and other services. Quite often these service providers will lower their price if you ask them to look into your contracts. Some have client retention departments that deal with such requests regularly and have the authority to give discounts to retain customers, especially if you have been a loyal customer and/or your contract is up for renewal. Furthermore, they may have lowered their monthly fees since you started doing business with them.
Ask Your Landlord to Reduce Your Rent
There are hundreds of vacant commercial spaces across the country! How many are in your neighborhood? If your lease is coming up for renewal soon and there is a lot of vacant commercial space in your area, ask your landlord for a rate reduction on your lease. There is no harm in asking and making the request. They may just be open to lowering the rent to keep you as a tenant.
If they won’t reduce your rent, shop around for a new location with lower rent and let your landlord know you may have to move. Before deciding however, be sure to consider your cost for moving the business to the new location and ensure you check all lease requirements/restrictions.
If your lease isn’t up for renewal but your business is struggling, ask the landlord if they’ll give you a temporary break on costs or allow you to defer the rent. If they like you as a tenant and have no one to replace you, there’s a chance they may give you at least temporary relief.
If your lease isn’t up for renewal, and the landlord won’t budge on price, look at the lease document you signed and see if there’s an “out” clause in it. An “out” clause is an option in the lease that lets you get out of the lease if you notify your landlord in advance. Typically, the advance notice is 3 to 6 months. If you can get lower rent elsewhere, or even operate your business from home, consider taking advantage of the advance notice option.
Adjust your Ordering Strategy
If vendors aren’t offering the prices you desire and can make a profit off of, you might consider changing your overall ordering strategy. In many cases, small businesses can cut overall costs by either consolidating orders, breaking them down, or finding a new supplier.
Bulk products and pack sizes save money. Buying goods in bulk both increases your value to suppliers and boosts the odds of them giving you deals. After all, vendors have cash flow problems, too. If you place a bigger order with a larger initial deposit, the supplier might be willing to negotiate with you on cost per item. An added perk, it could lower your total shipping costs, too.
As a note of caution, you should avoid purchasing in bulk for inventory that is likely to expire or become outdated. For best results, plan out your daily use and forecast what quantity is best for you to purchase that you will confidently move through, without expiring before their shelf-life and best before fresh date. You do not want to tie up cash that you need for other purchases or have to dispose of items you can no longer sell!
Create Competition Among Vendors and Suppliers
You might be hesitant to tell your current paper supplier that you’re shopping around for a new vendor. However, creating some healthy competition is a good way to keep costs down. In fact, when a supplier knows that you’re pursuing other options, he or she is more likely to offer you the best deal possible—even if it’s not the one stated in your current contract.
If your vendor of choice won’t work with you on price, shop around for another vendor. Ensure you maintain the quality you want to be serving your customers. There are usually multiple suppliers for all products. Ensure you check total landed costs of items, including all delivery fees. Also, plan out your minimums to make sure that it works with your business. Depending what you need, you may be able to find multiple suppliers. Sometimes the most competitive prices for some items can actually be found easier and quicker at Costco. If so, you could save on the cost of supplies and shipping (but ensure you calculate labor time to shop and pick-up products!) To be sure the new supplier really meets your standards, buy a small quantity at first.
Reduce Costs by Changing your Payment Strategy
Paying bills last minute or late is not ideal. Rethink and re-plan your strategy and look for cost-savings. Some suppliers offer discounts to customers who pay within a short time. For instance, they might give a 2% discount for payment within 10 days. You must take advantage of these discounts, if possible and when possible. Another option: if you usually pay by credit card, ask if the vendor will give you a discount if you pay with a check. The vendor may be willing to do so because the company will save the credit processing fee. And of course, avoid paying bills late, as doing so can result in added fees and penalties that send your overall costs skyrocketing.
Ask for Other Perks & Benefits
Often times, vendors may simply refuse to negotiate lower prices. In these cases, small businesses might want to request other perks, such as faster shipping, longer product warranties, and lower down-payments. You can also ask for support with merchandise, gifts for customers and staff, etc.. You can often work out an agreement that is beneficial to both parties—you just have to ask!
Remember: most suppliers would rather negotiate with you than lose you as a customer altogether.
Follow the above tips to control your expenses and keep your business afloat during this pandemic. Implementing these techniques will help position your business for not only survival but to thrive through these challenging times.