Are you familiar with the quote, “Never spend your money before you’ve earned it”? Here is a predicament; What if you have already spent it before earning it?
Unfortunately, the vexing Covid-19 has stunt cashflow for majority of businesses as they have to continue paying expenses with, or without a revenue stream. Fortunately, dependant on where you reside, governments have rolled out economic relief funding programs to help businesses survive in hopes of keeping unemployment rates under control. Survival is crucial, but thriving is the objective.
‘How can I improve money management skills during this pandemic?” is a question to consider. Adaptability is gold. Let’s take a look at tactics to price right, cut costs and find new opportunities.
Before debating which costs to cut, have a plan and prioritize expenses that can be potentially eliminated. Ask yourself, what is the dollar value you need to slash to thrive? Depending on your industry, here are some factors to consider:
Trace variable costs diligently- Review all the applications you’ve signed up for on a trial basis and possibly forgot to cancel. Are they crucial to operating your business today? Confirm with your team and cancel cancel cancel. Variable costs are the simplest to eliminate, especially since your production levels has most likely decreased.
Be firm on fixed costs- Master the art of negotiation with your vendors or landlord to lower your rent or apply for rent subsidy.
Use space efficiently– Do you have an extra room or area you can rent out to a freelancer?
Offer incentives to staff- If your employees are asking for a raise and you’ve exceeded your budget, offer them shares in your company or a bonus structure if performance turns into results.
Outsource services- Unemployment has increased and a plethora of freelancers are willing to do the job for less compensation.
Create a strong online brand– Online presence is the key to cutting costs.
Use credit to your advantage- Get a line of credit or consider credit transfers at 0% interest. Call your financial institution today and ask for incentives or promotions to be applied to your account. Be firm.
Get creative- No marketing budget? no problem! The online world is full of digital marketing possibilities.
There are many ways to cut costs on a shoestring budget and still operate efficiently. Every penny counts so make a plan and just cut it.
Price With Consideration
“The moment you make a mistake in pricing, you’re eating into your reputation or your profits.”
We are experiencing a volatile epoch within the consumer market and it’s essential to consider your pricing metric. When was the last time you scanned your competitors to see their pricing structure compared to yours? Would you consider lowering or increasing your core pricing? A recent study established from Canada’s Salon Magazine resulted in compelling data about this exact topic; More than 50% of participants answered yes to increasing their prices, while 46% is keeping pricing same and only 1% will be decrease pricing pre Covid-19.
This is where the magic of economics can be applied. Practice calculating your Marginal Cost to see the potential of cranking up your production volume to take advantage of a volume discount from your vendors. The results from your quantitive research can potentially lead to a price decrease, which leads to a competitive advantage. If this alternative is not currently possible, consider looking for a new vendor all together to boost your profit margins.
You might find it more fruitful to keep pricing the same, but offer discounts to emulate an attractive pricing strategy instead. Your pricing structure is powerfully influential over how your company is perceived so do your research to see if a discount pricing strategy will damage or help your revenue.
It’s also vital to consider your customer acquisition cost as this important piece of the puzzle is often overlooked, mainly because calculating CAC is not easily measurable. A basic example is spending $100 in marketing and obtained 10 new customers as a result. Your customer acquisition cost is then $10 for each customer acquired. The results could raise the opportunity to offer more promotions and discounts instead of delegating the money towards your marketing budget. If you find the cost of your customer acquisition is high, some tips and tricks might help reduce your cost per acquisition.
The better you can track and differentiate between your bottom line, the closer you are in achieving a competitive pricing strategy.
The future of shopping is e-commerce and a prime example is Amazon.
Amazons nucleus success is based on building a community for their customers, offering a potent loyalty program (Amazon Prime) and being genius innovators. Aside from Amazons warehouse inventory, fixed expenses are almost eliminated which is the power force behind their competitive and attractive pricing. Abysmally, Amazons success has driven many big brand stores to claim bankruptcy. Now that is power.
The Power of Reviews
Encourage and offer incentives to your customers to leave positive reviews. Research shows 45% of shoppers refer to reviews before making a purchase and 87% of consumers trust reviews from people they know vs. brands. My dentist clinic offers a $10 Starbucks card for every positive review a patient leaves and you bet I left a review and enjoyed my venti chip chocolate dairy free half sweet Frappuccino! The more reviews you obtain, the more opportunity you have to attract new clients.
We know how vital it is for small businesses to stay cash positive during this time. Have you considered setting up a Shopify store? If you are are selling a product in your storefront or beauty salon, they Shopify might be an e-commerce solution to raise awareness for your goods.
Invest in Technology
So, how do you slowly shift your business and adapt towards an online visibility model? Try a software that offers all-in-one solution tool such as online scheduling software. Through Yocale, you’re not only managing appointments but can maintain a germ- free area and take payments through a prominent Point of Sale system, offer an innovative booking experience for your clients and even use Google my Business integration for enhanced visibility in search.
Whichever strategy fits your business model best, act now to minimize costs, execute research to offer an unbeatable pricing strategy, pay attention to upcoming trends and strongly seek online opportunities.
Do less and still earn more.