Fixed expenses are supposed to be set and not negotiable, but anything is negotiable if you persist and explain the situation. Our office landlord let us pay 50 to 70 percent of our normal rent during a serious slowdown in our sales for about four months. For five years, we had always paid on time, so the landlord didn’t want us to move because of a short-term problem. When we were able to pay the full rent again, we added a little extra each month, which was applied to the previous shortfall balance. In another instance, about two-thirds into our lease, we renegotiated a new longer lease and asked for two or three free months at the beginning of the new lease.
Basic utilities are usually impossible to negotiate with, and that’s what I found with the electric and gas companies. But our phonecompany rep actually knew a little about our company, and because we had a couple of other options for phone service, he was willing to help us. We had about eight lines, including phone, Internet, fax, and merchant services. Because we were getting more emails and fewer phone calls than before, we wanted to cancel one of our regular lines to save money. It was under contract, but the rep waived the cancellation fee, and we had the line disconnected. Then, about a month later, he called and said he could reduce our basic monthly charges by 50 percent for the following three months. That saved us about $130 a month, which was much appreciated. I never thought the phone company would
consider helping us, but it’s proof that all you have to do is ask. The worst that can happen is you’ll get a no, and that’s where you started anyway, so what’s the harm?
Many business owners think that payroll is a fixed expense, but there is room to adjust. Although you can’t change the tax part, you can change the total payroll amount. During a severe financial crisis, you can ask your employees to accept a temporary basepay adjustment and/or reduced working hours. Explain that you are offering this before you have to make cuts and layoffs. You may find that some people welcome fewer hours and if they can still keep their jobs. Others will grin and bear it as long as it’s not a long-term situation.
If your employees refuse to concede anything, you have no choice but to make layoffs where you feel necessary. Unfortunately, the business’s overall survival is more important than the bad feeling you get from making layoffs. This is the tough part of owning a business, but sometimes it must be done. And for sales surges during your slowdown, you can use temporary personnel to fill the gaps.
Another way to cut payroll expense is to find areas that you can outsource. This will allow you to reduce salary, benefits, and employer taxes. Just be sure that the company to which you are giving the work will perform up to your standards. Before you outsource, check a few references from some of their current clients to make sure that they are satisfied and the work is done on time. After you’ve turned work over to the company, it will be difficult and time consuming to change again.
If the company to which you outsource can’t do 100 percent of the work, give the rest to a current employee to handle in-house. You might even consider a current employee who can do work at home on off hours with the help of his or her family.