10 Budgeting Tips to Survive a Recession
Saving money has become a mammoth challenge for today’s small business owners.
Soaring inflation rates, accelerated by skyrocketing food and energy costs, produced last week’s pessimistic Bank of England forecast that the UK will fall into a recession this year. As a result, interest rates have been raised to 1.75% – the highest levels in 27 years.
The outcome might not be surprising to those SMEs that have already been heavily impacted by the ongoing cost of living crisis.
Still, with the economy not expected to grow again until 2025, there is now an imperative for small businesses to minimise expenses wherever possible for their own survival.
No idea is too small to improve cash flow. We’ve come up with a list of 10 hints and tricks to strategically cut back on spending and optimise your existing purchases.
1. Negotiate with your suppliers
Everyday, new platforms emerge that claim to be absolutely necessary for your business to succeed – but few organisations can afford to spend on them all. Startups’ own research has found that cost is the biggest barrier for small businesses looking to embrace new technologies in their business.
Outside of researching discounts and deals, how can decision-makers get a product for less than its price tag?
David Olusegun is founder of Creative Control Ventures, a marketing and consultancy firm. According to Olusgen, business owners should remember to “negotiate everything. We always try to speak to the customer services department and see if there are any discounts. Look for startup discounts. We got a lot on [platforms] like Slack.”
Timing is also a factor. Olusegen notes that sales people tend to need to hit their targets towards the latter part of the month and the last part of the quarter. Managers should get in contact during this time as sales teams are more flexible.
2. Audit, audit, audit
Have a look at your existing technology inventory. You might be able to replace a third-party application with your own, internal solution. These tend to be cheaper, although building one might require some software development experience.
Neil Sheth is founder of writefully, a content service provider. Sheth undertook a cost analysis and audit of the company’s hardware during the pandemic to look for money-saving opportunities.
“We identified a piece of software that was costing £2,000 per year that could easily be replaced with our own coded dashboard,” he recalls. “It cost us around £700 to build but there are no more yearly fees.”
3. Be open to open-source software
Subscription-based models can be a pain for smaller businesses with inconsistent cash flows. Entering into an annual contract when you’re just starting out often brings financial risk.
Adam Hosker, chief technology officer at Cyborg Finance, advises that entrepreneurs therefore look for “the ‘open source’, also known as free” alternatives. For example, LibreOffice is a free downloadable alternative to Office 365.
Hosker also points to CRM software as an example. SalesForce is £240 per user a year whilst HubSpot is free to use for small teams.
4. Less is more with event planning
Whether to promote a product or service, meet with clients, or bring teams together for team-building, events can really help a company to engage with its audiences.
But there’s no getting around it – events are an expensive and time-consuming thing to organise, especially when taking into account venue hire, food and drink, and the time taken to invite guests.
Ann Juliano is CEO and founder of Muse Finance, an SME finance provider. Juliano describes being able to “cut costs by working with local cafes or restaurants” for event space.
She explains that “oftentimes, they’re simply happy with the additional footfall an event brings to their venue, so don’t charge extortionate booking fees.”
If you’re in a co-working space, it’s also worth seeing if your operator will offer any support with setting up events. Juliano cites that The Office Group, a flexible workspace provider “helped us to run a 50 person event last month.”
5. Build relationships with other SMEs
Deepak Shukla is owner of Pearl Lemon Café, based in Fulham. According to Shukla, the best money-saving advice he has received originates from other SMEs in the industry.
“They’ve shared some very helpful tips that they’re more experienced with, and that’s made a huge difference for a young business like ours.”
So what is the best advice Shupla can give Startups’ readers?
“It’s important to collaborate with other businesses to promote your own,” he says. “One way of doing that is by ensuring that you offer value before asking for favours. This can be by writing articles about them, sharing tools that can help them be more productive, or even introducing them to other industry leaders.”
Shukla states that relationship-building has been “a huge lesson” for his education as an entrepreneur. It has even led to a business on Pearl Lemon’s street agreeing to promote the café with free advertising space.
6. Rent, don’t buy
One way to reduce outgoings is to rent your equipment instead of purchasing it outright. For example, if you run a gym business, the initial start up costs can be huge – as much as £500 for a set of weights.
If you’re struggling for funding, renting weights would cost around £50 per month – giving you ten months of time to generate a larger profit to invest in a set you can own.
However, while renting can be useful for short-term cash flow improvement, it will cost more in the long-term. That’s why Philip Bacon, director of Bacon Marketing, took a circular economy approach to his hardware budget.
“We looked at refurbished and factory seconds, including those with damaged boxes,” Bacon admits. “All in all we save between 20 and 35% on hardware that way.”
7. Is it worth the paper it’s printed on?
An investigation by Which? found that the total cost for a refill of Epson’s own brand ink is £107.48 (averaging out to more than £2,410 a litre).
Printing less on paper is an easy way to reduce overheads and minimise expenditure on other office staples like pens and ink.
Tahina Akther, co-founder of Wildcat Law, recently switched to using a tablet to view, and write on, documents at the same size as A4. “The savings in paper, files, stationery and disposal costs will more than cover the outlay in the first year”, she explains.
Cloud-based accounting software – which you can often run for free – is a good example of a system that can store things such as customer records and invoices digitally. This means you don’t have to worry about storing miles of folders in the office or in separate storage facilities.
Still, if you’re not quite ready to say goodbye to the experience of paper, there are still simple behavioural changes that contribute to a reduced printing budget.
One such tip comes from Salla Västilä, CEO and founder of marketing firm, ainoa.agency. To cut down on printing costs, the agency has switched to using QR-based business cards.
“You can scan the card and it will take you to a virtual business card page,” Västilä reveals. “You need only one and it can last until eternity basically.”
On top of this, Västilä recommends changing your font to “an eco-font – a font filled with tiny, microscopic holes” to save on ink and prolong cartridge replacement.
8. Lose the recruitment fees with online job sites
Today’s competitive job market means recruiters are winning big as firms throw money at third-party talent seekers to plug the gaps in their workforces.
Ann Juliano from Muse Finance tells Startups that “hiring more talent to join our team is a key priority for us at the moment, but recruiter fees can be rather expensive for us to shoulder as a growing business.”
In response, Juliano has turned to job sites such as LinkedIn and Indeed. Having direct contact with candidates for a job role, she no longer needs to use recruiters to get the ball rolling on hiring.
“We’ve been able to massively cut our costs here, while maintaining our recruitment pipeline,” she reveals.
9. Limit staff costs with apprenticeships
Some SMEs think training an apprentice is too time-costly to take on. In fact, it is actually known to be more cost effective than hiring already skilled staff.
You can use the government’s Apprentice Levy scheme to pay lower overall training and recruitment costs.
The levy is a UK tax on employers which is used to fund apprenticeship training. Under the current rules of the scheme, the business owner will pay 10% towards the cost of training and assessing their apprentice, while the government pays the remaining 90%.
As Katherine Steiner-Dicks, founder at media services company BuzzVestor Media, points out, all businesses pay into the Apprentice Levy, so “make the most of it by getting another pair of hands on board to build your business”.
This rate continues until your apprentice completes their training, which means you’ll have a whole new staff member for one to five years depending on the sector.
10. Reduce, reuse, recycle
Sustainable practices and money-saving methods often go hand-in-hand in business. We recently wrote about how you can halve your energy bills by embracing green technology.
Jenny Blyth owns Storm in a Teacup Gifts, a retail firm specialising in bespoke gifts. Blyth says her biggest and best money saving tip as a small business is to reuse packaging – a cheap and easy measure that will also help you to improve your sustainability credentials.
“We’ve embraced reused packaging to such an extent that we now pop an eco-friendly sticker made from recycled paper and water based glue to all our parcels so that everyone knows why their parcel may not look shiny and new.”
Delia Hawley, owner of skincare manufacturing firm Dalia Botanique goes one step further by salvaging packaging from her personal post to package her orders. The company’s customers, she says, appreciate the indirect savings.
“Packaging can often be quite expensive and the cost is then passed onto the consumer”, Hawley explains. “This way we can reduce the cost for everyone.”
Small steps for small businesses.
Forget the rainy day – UK SMEs will need to save their money for a rainy decade, as the Bank of England’s prediction claims there will be little economic growth until 2025.
There are only so many fixed and variable overheads that small business owners have control over. Inflation has already sent rent and utility bills skyrocketing, and the government has provided nothing in the way of support.
Surviving the turmoil of the next two years will instead depend on business owners adopting thrifty, tactical measures, such as those listed in this article.
Doing so will enable them to build up a defensible fort against the cost of living crisis – as opposed to relying on the moat of HMRC support packages offered during the pandemic.
Need to think bigger about budgeting for a recession? Read our guide to preserving cash flow for more tips and tricks on how to scale back your business.
