Sole Founder/CEO of PostcardMania. Joy bootstrapped her business to $62 million in 2019 with only a phone, a computer and postcards.
After the initial shock of Covid-19, no job seemed safe — unemployment during the pandemic peaked around mid-April at roughly 14%.
My company, PostcardMania, was facing the same predicament as everyone. With this dip in the economy, and weekly earnings down 41%, where should I make cuts to stay afloat? Payroll cuts, while an ugly option, would seem to be one of the more practical cutbacks for a financially struggling business, especially one with 282 salaries.
However, I had this burning feeling that all of the hard work and expense we had invested into finding and training our staff was something we had to hold onto (not to mention the responsibility I felt to the families of all of those individuals). So instead of furloughing or laying anyone off, I took a deep breath and made the firm decision to personally cover payroll at my company until things turned around.
It was a long and stressful six weeks, I’m not going to lie, but we’ve held steady. We kept every employee on, and have since added 33 brand new jobs. Plus, we managed to pull off our highest-ever June and July revenue months in the history of the company.
Keeping our staff was a major contributor to this. We looked to alternative areas where we could regain that lost income that didn’t involve us letting go of anyone from our workforce. Based on this experience, I’d like to share the four major strategies during those difficult months that helped turn things around.
1. Calculate the long-term cost of reducing your staff.
I know there are business leaders out there who feel like there are no alternatives to recovering lost income other than reducing their payroll expenses. But instead of looking at the immediate savings, try to contextualize slimming staff down like this — SHRM estimates put each employee’s replacement cost at a whopping one-third of their annual salary.
As for myself, I’ve always viewed my employees as unexpendable. Laying off the people I’ve worked so hard to find in exchange for some temporary financial breathing room doesn’t make any sense. Perceive the team behind you this way, and they might surprise you with what they accomplish for your business.
So, where can you find that financial breathing room, then?
2. Review and consider company assets that can be liquidated.
The first step to evaluate where you can make cuts is taking a step back and looking at your company’s database and assets. This may seem obvious, but there are estimates that up to 73% of company data goes unused for analytics. Not knowing how to leverage data can negatively impact productivity and efficiency levels and, in turn, cost your business significant revenue.
When we took a step back to analyze our data and assets, we realized that our storage facility — although useful — was a great asset to liquidate for some financial breathing room. So we sold it as soon as we figured out we could. Figuring this out didn’t require any expensive data analyzing technology, just some creative thinking.
3. Consider shuffling debts and taking on strategic debt you can pay down easily and quickly with low interest.
Debt is an inevitable part of running a business. In times like these, however, certain kinds of debts can be crippling. You really need to pick your battles. For example, when the Personal Payroll Program (PPP) rolled out, we jumped on the opportunity for a completely forgivable loan. Even if it wasn’t wholly forgivable, at a low-interest rate of 1%, this was a great low-risk opportunity to get some financial breathing room. It helped alleviate the pressure immensely.
When I say shuffle your debt, I mean utilizing the relationships and network that you’ve built. If you’ve conducted your business ethically and don’t ask for too much, it shouldn’t be too much of an issue to ask for some immediate help. For us, that meant asking our vendors for some leeway and allowing us to accumulate debt to pay off in the immediate future. They value our business and history with them, so this was easy.
4. Maintain or increase your marketing to recover.
When trying to implement an aggressive cost-reduction business strategy (especially in an economic crisis), one of the usual contenders first up on the chopping block is marketing. If you thought of this too, you’re not alone — some estimates say that 86% of marketers are currently either delaying or reviewing campaigns.
However, I believe this thought process is faulty.
For example, during the 2000 recession, Target ramped up marketing efforts by 20%, according to Havard Business Review (registration required). During the recession, Target grew sales (40%) and profits (50%), and ultimately increased its profit margin from 9% pre-recession to 10% post.
Don’t get me wrong; it wasn’t solely marketing efforts that sustained these successes. They were coupled with other moves to improve efficiency, slash costs and strengthen productivity. But marketing time and time again has proven itself to be a critical investment in your business’s longevity — not an optional business development tactic.
As Ken Blanchard said, “None of us is as smart as all of us.” Before you go about selecting which of your staff to let go, consider the alternatives that may actually cost your business a lot less in the long run.
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