Along with many other small to medium enterprises (SMEs), Australia’s HVAC&R sector is struggling with a number of challenges, from marketing to growth problems and cash flow.
The founder of SME Savings, Michael Reid, outlines seven simple ways SMEs can cut costs.
Cash flow, like air flow, is the lifeblood of your business, and managing it well will ensure your business’ vital signs are stable. Outlined are some ways that you can pump life back into your business and thrive in even the worst economic conditions.
1. Ask for supplier rebates
Suppliers often offer discounts of up to 2.5 per cent for early settlement or on-time payments. When multiplied across your main suppliers, this quickly adds up.
You can also use ‘volume’ as a means of accruing discounts. If your order is not sufficient enough to bargain with, try finding like-minded SMEs in the climate control industry and establish a mini buying group. Or, join an established buying group that will do the legwork and negotiating for you.
2. Cut non-core services
Offering too wide a range of services can be costly and distract you from where your business’ core strength lies. It may be worth looking at what types of services and products are the most beneficial and focusing on these.
3. Shrink your tail spend
Tail spend covers those things you purchase that don’t directly drive your business, but it can comprise up to 30 per cent of your business’ total costs.
Instead of looking for savings and discounts with core suppliers, where the larger orders are placed, try shrinking your tail spend and get some quick wins in expenditure across a number of smaller suppliers.
4. Bring in the experts
Small business owners are often time- and resource-poor, so outsourcing jobs like marketing and book-keeping can be a cost-effective way to achieve results. It also leaves you with more time to focus on running the core aspect of your business.
5. Manage your supplies
Maintaining the correct stock levels of supplies to be able to service your clients well without having stock left over is a difficult balancing act, but is crucial to creating better cash flow.
Make sure that you are ordering products
at the best time to take advantage of your credit accounts with suppliers, so you are only restocking when necessary.
6. Market smart
Smart marketing can lead to a huge increase in profits for your business through more frequent patronage, add-ons and even increased prices.
This can include ensuring your clients receive constant communication and helpful advice so that you are top-of-mind; scheduling follow-up calls and reminders when it is time for maintenance; and utilising vouchers and referral incentives.
7. Draw up a list of businesses that compliment your climate control business such as plumbing businesses, and see if there’s a way you could help each other out.
Here are some things you could suggest to potential referral partners and strategic alliances:
Offering discounts to customers when they use each other’s services
Writing guest posts for each other’s blogs or newsletters and
Including vouchers for each other’s
businesses in gift/info packs.
Don’t forget to make the most of
other low-cost and free marketing tactics such as social media, PR, networking and speaking opportunities.
With many small businesses expected to face continued declines in revenue over the next 12 months, now is the time to give your climate control business a health check.