Fixed costs are the bills your business has to pay no matter what. Even if your firm has shut down, closed premises or stopped serving customers, you will likely still be facing these kinds of costs. It’s always good business to control your fixed costs but, during the coronavirus (COVID-19) outbreak, it could make all the difference to the survival of your business.
Your fixed costs will almost certainly include rent, business rates, energy and utility bills, some forms of insurance, staff salaries and other costs that aren’t affected by how much work your business is doing, producing or selling.
As costs that are fixed, at least in the short term, what can you do manage them when revenue and sales are reduced?
We have rounded up the best resources, guides and most up to date information on this topic. Together, these should help you understand how to plan for and afford your fixed costs in the short term, and what steps you can take in the long term.
The government continues to announce measures to support businesses during the outbreak, so it’s worth checking its dedicated webpage regularly as well.
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5 things you can do today to manage your fixed costs
(1) Identify your fixed costs and when you need to pay them
Every business has a number of regular outgoings, but before you can control your fixed costs you need to know what they are. If you haven’t already, draw up a list of what your fixed costs are, the value of each, and how frequently you need to pay them. This last point is especially important as it allows you to forecast when your business finances are likely to face crunch points.
(2) Check which fixed costs might be supported by the government’s coronavirus support programmes
In response to coronavirus the UK government (and governments in Scotland, Wales and Northern Ireland) have made a lot of announcements of support. These have changed a lot over the last few weeks and will likely keep changing, but there has been a big focus on measures to support fixed costs in businesses. Various measures have been announced including schemes for employees’ wages, business rates holidays and loan schemes to provide short-term support.
Find out if your business is eligible and what action you might need to take to claim these measures.
(3) Take action to reduce the fixed costs that the government isn’t focused on right now
There are number of small things you can do to make a difference to your costs. Your utility bills – water, electricity, gas, phone and internet connection – are one of the biggest areas to consider. If your business has been forced to close its doors, then some of these will reduce anyway. However, there are some things you might be able to do to reduce them further whether you’re still open or not. Making sure that machines are powered down if not in use, looking at ways to improve or conserve heating in your premises, and insisting on lights being turned off when they’re not needed can all help. Small changes can add up to large differences surprisingly quickly.
(4) Talk to your landlord about a rent holiday
Rent may be one of the biggest fixed costs you have to pay, after staff salaries. Some of the government’s support measures and business loan schemes may be able to help you with this cost, but the first place to start is your landlord. Arrange a conversation with them, explain your situation and your broader plans for operating during the coronavirus outbreak, and see whether they would be willing to grant you some leeway. If an agreement can’t be reached and you think you’ll struggle to pay your rent, the government has also put in place measures on this issue. Businesses cannot be forced out of premises if a rent payment is missed, up to 30 June. If you own your premises, then it might also be worth considering whether you could rent out some space to another business that has seen an increase in activity during the outbreak.
(5) Talk to your other suppliers about payments, tariffs and services
For energy, telecoms and other fixed business service costs the situation is changing fast. Many suppliers are bringing in new guidance during the outbreak to help business customers in difficulty. There are different payment options and you may not be on the tariff and service level that is appropriate for your business today – or in the future if you need to reduce trade. Taking the time to review your services and tariffs and renegotiating them based on anticipated future needs could save you substantial amounts of money.
Looking for helpful advice and guidance to deal with coronavirus business issues? Visit Rebuild, our dedicated hub that brings together the experiences of companies from around the UK.
Managing your fixed costs: where to look for support
Supporting small and medium-sized businesses is a national priority during the coronavirus outbreak. There are a lot of guides and updates being published to help you manage your fixed costs as part of keeping business going. We have rounded-up the most useful sources for immediate help and longer-term advice.
Get the most up to date information on how the government is supporting small businesses
A number of major government announcements have been made over the last few weeks on business support. These are likely to continue to change so you may want to bookmark the government’s dedicated web page and check it regularly. If your business is in Northern Ireland, Scotland or Wales, check the relevant announcement pages on these websites as well.
Want to understand more about identifying what your fixed costs are?
If you would like a refresher or a straightforward guide to identifying what you should count as fixed costs, there are a number of good places to start. Small Business Pro have a number of free resources and guides to help identify and manage your costs.
Get tips for keeping your office costs under control
Keeping your office costs low can always make a difference to your business’ profitability. It is never good to spend more than you need to on office expenses. The Federation of Small Business has a number of tips from their members on how to minimise what you are spending on your office.
Get updates on the support available to your business nationally and locally
The British Chambers of Commerce has a regularly updated site that pulls together the latest government information on coronavirus. It also contains links to help connect you to your local chamber. This will have more localised support and advice for you, and may be able to provide connections to specific organisations or support to help with your fixed costs.
Check your options with your energy, telecoms and other utility providers
Most energy, telecoms, broadband and other utilities will have information on their websites about how they are helping small businesses cope during the coronavirus outbreak. For example here are the BT and British Gas pages. Check with your provider, although bear in mind these suppliers could be operating a reduced call centre service, so online chat might be a better option. Some utilities have already started to make allowances for consumer energy bills being paid late. While there haven’t been similar announcements about business bills yet, keep a lookout for further updates.
See what protections the government has introduced to help you
If an agreement can’t be reached, the government has introduced new protections to prevent commercial tenants from being evicted. If you’re unable to secure a rent deferral or holiday, knowing what protections are in place will allow you to prioritise your costs and remain on-site.
Get free expert advice on coronavirus recovery tactics and stories from your peers at Rebuild, our dedicated support hub.