If you’re in any way connected to the outside world, you’re aware of large-scale economic woes in 2022.
When the word “recession” gets thrown around, many businesses begin to hit that “panic” button and start cutting costs everywhere they can.
But, the biggest mistake most businesses make is cutting the lead-and-revenue-generating parts of their business, making their financial problems even worse, while their competition forges ahead, leaving them in the dust.
There’s something to be said for fiscal responsibility and trimming the fat, but don’t automatically cut the biggest expenses just because the numbers are higher.
There’s a right way and a wrong way to preserve your business (and even grow) during a recession.
Here’s what your business should (and shouldn’t) cut in times of economic uncertainty.
What Your Business Shouldn’t Cut During a Recession
- Marketing & Advertising
One mistake that a lot of companies make during an economic downturn is cutting their marketing budget because it’s often one of the most significant monthly expenses. But, cutting marketing has a ripple-effect that can be extremely damaging to your business in the long run.
After all, generating SOME new business during a recession is far better than bringing in NO new business.
Plus, because marketing is one of the first things many businesses cut during a recession, this is your chance to start getting your company in front of your ideal customers while other companies let themselves fade into the background.
- Training & Coaching
So let’s say you don’t cut your marketing budget and you continue to get a steady flow of leads.
Nothing will materialize with these leads if your team doesn’t know what to do with them.
Cutting training, your sales coach, or other education for your team will leave your company with a mess of unclosed deals.
Now is the time to strengthen your team, not scale back.
- Search Engine Optimization
It’s super common for businesses to cut their SEO budget when finances get tight. But, like marketing, SEO puts your company directly in front of the people searching for your products or services.
While other companies pull back on SEO spending, keeping yours strong will give you an advantage: you’ll start scaling the ranks, and getting in front of interested customers.
And even during a recession when fewer people might be looking, you definitely want to be front-and-center for the ones who are.
- Your Highest-Paid Employees
Cutting several thousand dollars from your company expenses sounds nice….in theory.
But, it’s one of the biggest mistakes your company can make during a recession.
Your highest-paid employees are often the employees that are also the highest performers, have been with your company the longest, or bring a specific skill set to your business. These employees are what keep the wheels on your business moving.
Letting go your highest-paid employees and hiring less expensive talent isn’t a cost-effective way to save money during a recession. Sourcing, vetting, hiring, and training employees costs money, too. Plus, the time it will take to get new hires to a level of high-performance takes time. You’ll likely lose more money letting go high-salary employees and hiring lower-paid ones.
And, once the economy bounces back (and it always does), don’t expect any of your laid-off employees to be banging at your door to come back.
This is a workers’ economy. People have options and great talent is sought after.
As the adage goes, don’t change horses in the water.
What Should Your Business Cut in a Recession?
What about the things you actually SHOULD cut during a recession? Let’s talk about 4 things that you can slash from your budget to keep your business open during a recession.
- Software & Services You Just Don’t Use
Now is the time to pore through your credit card statement and find those recurring monthly charges you’ve forgotten about.
Unused or underutilized software subscriptions, services that you can totally do yourself can be cut. Remember, as the CEO, you’re not above shredding documents on your own or cleaning the office yourself.
Instead of cutting employee salaries or letting go of employees entirely, reducing bonuses can go a long way in saving money during a recession. This goes for your C-level executives that get several thousand dollars in bonuses every quarter as well.
Nobody wants their bonuses cut, but you can make up for this expense reduction in other ways.
Which brings us to…
- Office Attendance (This Isn’t JUST For the Company)
If your company hasn’t looked at a remote-working model, and you run a business that doesn’t require your employees to be on site, now is the time to let your employees work remotely.
If you’re cutting a huge check for an office that your business doesn’t NEED, it’s time to stop cutting that check.
Besides, gas is expensive. So is time. Giving your employees a few hours of transit time back per week and allowing them to cut their own costs by not needing to fill up on gas. Especially if their bonuses have been (hopefully temporarily) halted.
- CEO Payroll
As the CEO, it’s understandable that you need to make a living.
In fact, you DESERVE to pay yourself, and pay yourself well.
But as the CEO, you’re the captain of the ship. And if you don’t want to go down with your ship, cutting your own salary is a fiscally responsible move during a recession.
Can Your Business Survive a Recession?
Absolutely. In fact, all businesses can be recession-proof if you make smart financial decisions and cut (and keep) the right parts of your budget.
Retaining talent, keeping business rolling in, and keeping your business afloat by taking a paycut of your own will help not just keep your business afloat, but you’ll come out of a financial downturn even stronger.