A new year brings celebration and a fresh start. But for many small business owners, 2023 has started with cash flow worries and recessionary fears.
Inflationary pressures are pushing up the cost of doing business, resulting in steeper-than-usual gas prices, higher supply chain costs, and rising labor expenses and shortages. The resulting squeeze on margins is prompting business owners to find cost savings wherever they can.
One area that’s particularly expensive is commercial real estate.
In October last year, a survey from Alignable, a small business referral network, found that 37% of small business owners were unable to pay their rent. What’s more, 51% of small business owners faced higher rents last year, which coincided with consumers spending less.
For many small businesses, this is simply unsustainable.
That’s why cost efficiency is taking the number one priority for business owners in 2023.
How can small business owners become more cost-efficient?
The first step to helping your company save money is to take a long, honest look at all your company expenses. Be as thorough as possible and leave nothing out (even the coffee you’re buying).
Once you have a clear idea of where your money is going, you can start identifying areas where you can cut costs.
The two top expenses of companies tend to be:
- Workplace costs
Where staff costs are concerned, consider outsourcing some services to freelance workers or specialist service providers.
Outsourcing means you hire talent for the lifetime of a specific task, which could be a matter of weeks or even just a few hours. Whether you need marketing help, maternity cover, or someone to answer customer service calls, these types of service agreements are usually highly flexible and cost efficient – especially when compared to the cost of hiring a permanent member of staff.
As for workplace costs, given the difficulties that small businesses are facing paying rent, it’s unsurprising that many entrepreneurs are now transitioning to online operations.
For businesses operating in traditional storefronts, switching to an online-first model can significantly reduce costs without sacrificing profit. In fact, focusing more on online sales can help a business grow.
Online businesses can sell to people in their area just as easily as physical storefronts can, but they can also reach markets across the country, all while saving money on rent and time on commutes.
As for office-based companies, it’s now much easier and more acceptable to operate in a remote setting.
Since the onset of the pandemic, knowledge-based companies all over the world have become accustomed to home-based work. And despite the insistence of some companies to bring staff back to a centralized office, many business leaders have realized that it’s more cost-efficient to continue with a remote or hybrid workspace model.
By leveraging flexible workspace solutions, companies can enable their staff to work from home while maintaining a physical workplace for meetings and team collaboration.
Some firms do this by taking out a coworking membership close to employees’ homes, which enables workers to drop in as needed to work quietly or meet up with colleagues.
Another solution is a virtual office.
Designed for hybrid teams and remote organizations, a virtual office combines a company address with access to professional office space whenever needed.
Companies that use virtual offices rent the address and pay for workspace access by the hour or by the day. As an example, Alliance Virtual Offices provides virtual office plans starting from $49 per month and hourly meeting room access starting from $10 per hour.
Compare this model with renting a physical office 24/7, and it’s easy to see how companies can save hundreds, even thousands of dollars per month.
After all, office space is simply a waste of money when no one is there.
Let’s take a closer look at the benefits of a flexible workspace solution:
- Lower risk and commitment: Long-term office leases and rent obligations are risky, especially when facing a recession. A flexible space solution such as a virtual office provides shorter-term agreements with greater agility to help businesses ride out unexpected changes.
- Cost savings: Many businesses have come to realize that they simply don’t need a physical office space or storefront. If your team works productively from home, and if you can transition your business to an online or remote operation, you can free up a significant amount of capital. You can then invest those savings into business growth.
- Efficiency: Operating flexibly and with less physical workspace is more efficient from a resource perspective. You don’t need to hire lease negotiators, facilities management experts, building maintenance staff, or even cleaners – with a flexible workspace solution such as a coworking space or a virtual office, it’s all managed for you.
While high inflation and squeezed margins are putting pressure on entrepreneurs, it’s not all doom and gloom. Last year, research from PYMNTS found that two-thirds of SMBs were optimistic about their top line and general growth prospects, even though inflation was top of mind.
Looking ahead, business leaders that can reduce costs can invest those savings back into their businesses, paving the way for innovation and growth in 2023.
Interested in saving money on your workspace? Chat online with the team at Alliance Virtual Offices for helpful advice on flexible work solutions. Get started at www.alliancevirtualoffices.com.