Every day, you turn on the news and hear new stories of capers, collusion, and calamity. Political and social unrest seems to plague almost every corner of the globe. The pandemic still holds its grip on many parts of the world. And most of us wake up wondering what, not if, a disaster will occur that day.
Not to focus on doom and gloom, but the level of uncertainty in the world is undeniable. And the economic outlook isn’t helping. U.S. inflation, currently at 9.1%, has hit a 41-year high. Grocery prices have increased by a whopping 12.2% since June of 2021. And gas, at the crux of price increases, has hit the 5-dollar mark in many parts of the country.
But as if that wasn’t enough to rouse your doubt about the solvency of the American economy, the markets have responded. Since the beginning of 2022, the S&P 500 is down 21%, its biggest first-half loss in 50 years.
While most experts argue about the causes, ramifications, and solutions to these economic woes, there’s one thing they tend to agree on: that the country is headed for a recession. No one knows when, how long, or how big, but the stage is set for the economy to shrink.
When it does, will your Texas business be ready? Unfortunately, despite its many economic virtues, the state isn’t immune to the effects of a global or even national recession. So now’s the time to start thinking about how you can cut costs to become leaner for the economic winter ahead. Here are a few tips Texas companies can use to cut costs.
Tip #1: Reevaluate Your Insurance Coverage
Insurance for Texas-based businesses is a cost every company needs to consider when creating their budgets. Many businesses bundle their insurance policies into business owners’ policies. These usually have several different types of insurance packaged together to create a single monthly premium. Business owners’ policies can include many types of insurance, but here are a few of the most common.
General Liability Insurance
This type of insurance is one every business needs. It’s the umbrella covering your business when the unexpected happens, whether it’s a natural disaster, work injury, or lawsuit. You need general liability to protect every aspect of your operations.
Professional Liability & Errors and Omissions Insurance
This type of insurance may or may not be necessary, based on what you do. For example, professional liability and errors and omissions insurance is often geared toward financial services, legal counsel, or medical care providers—high stakes, detail-oriented work where the consequences of errors are significant.
But just because your business doesn’t fall into one of those categories doesn’t mean you don’t need this professional liability or errors and omissions insurance. Errors occur in every line of work, and if a client sues you for a mistake, this policy ensures your legal fees are covered.
Tools and Equipment Insurance
Does your business use specialized tools or equipment? If so, this is a policy you need. For instance, this tools and equipment insurance probably isn’t necessary if you’re a business consultant working from a home office.
But if you’re an electrician servicing homes and businesses in your community, tools and equipment insurance is an excellent idea. This policy will reimburse you if equipment breaks, gets lost, or is stolen. It will also cover damage if you lend equipment to someone else.
Commercial Property Insurance
Let’s go back to the example of the business consultant working from home. They don’t have a dedicated commercial workspace, per se. But their home office contains their laptop, monitor, printer, and other essential equipment they need to conduct business. So what happens when a flood comes through and damages their office gear or puts their home workspace out of commission?
Contrary to popular belief, standard homeowners’ and renters’ policies won’t cover these losses. Commercial property insurance does. If you have a separate workspace or office, you need commercial property insurance to protect your business’ property and its contents.
Commercial Auto Insurance
Commercial auto insurance works the same way as commercial property policies. If you use cars, whether they’re personal or fleet vehicles, for your business, then you need to have this additional coverage to protect your interests. However, this type of policy is unnecessary and can be eliminated if you don’t do any driving for work.
Hired and Non-Owned Auto Insurance
Whether you own fleet vehicles or not, you may occasionally require a rental vehicle. When you do, you need added protection in case you get into a fender bender or accident. However, if you have never rented a car for work and don’t think you ever will, then hired and non-owned auto insurance isn’t suitable for your business.
Tip #2: Cut Workers’ Compensation Insurance
Although required in most states, Texas does not compel companies to carry workers’ compensation insurance. However, having workers’ compensation insurance is well worth the investment if you have any employees. These policies protect you and cover your staff should any employee have an accident requiring medical care.
If you’re the only employee of your business, workers’ compensation isn’t necessary and can be removed from your business owner’s policy.
Tip #3: Reconsider Your Real Estate
Think about your space if you don’t operate out of a home office. Is your lease coming up soon? If so, do you think you could negotiate your lease? Is moving to a smaller area or your home feasible if you can’t lower your rent (or mortgage payment)?
If you own your office space, are you using all of it? A great way to make extra cash is to lease or sublet a portion of the property you aren’t currently using for your business operations.
Tip #4: Eliminate Perks
You probably give your employees a lot of perks. But, whether it’s a newspaper and fresh water bottles in the lounge every day, or company-provided vehicles and cell phones, these things are expensive when you look at them collectively.
Cutting perks isn’t fun, but it is a great way to cut costs quickly. Of course, it won’t make you popular, but wouldn’t your employees prefer to lose their Friday pizza lunch instead of their jobs?
Tip #5: Cut Pet Projects
Put a pause on discretionary spending if you’re strapped for cash. Maybe you were hoping to paint your building this year or buy everyone new laptops? Whatever the pet project is, if it isn’t vital, sit tight until things look more solvent.
Tough times are on the horizon. When they do, will your business be ready? Prepare yourself with money-saving techniques to quickly cut costs and keep your business afloat.