As everyone is aware, the COVID-19 pandemic has wreaked utter havoc upon businesses large and small across the globe – and black car, limousine and other transportation companies have certainly not been spared the pain. Even before the crisis began earlier this year, many of these companies were struggling to survive in the face of competition, belt-tightening by corporate customers, and an overall sluggish economy.

COVID-19 has heaped a whole new set of problems on ground transportation providers, not the least of which has been a steep drop in rider volume, and the revenue that goes with it. While the knee-jerk reaction of many transportation companies has been to lay off staff and cut hours (and for many businesses struggling to remain afloat such steps may ultimately be unavoidable), as is discussed below there are other ways to cut costs that should also be considered.

Reduce Expenses and Eliminate any That are Unnecessary

While this probably seems rather obvious, one of the first things a struggling business should do is take an inventory of the company’s expenses. While there will be some you cannot eliminate (surcharges owed to the BCF, for example), there will be plenty of others that can be reduced or eliminated.

Here are some examples of expenses you might want to take a closer look at:

  • Office Space. A large part of any business’s overhead consists of costs associated with maintaining the physical space it occupies. This includes rent or mortgage, utilities, cleaning, maintenance, etc. Evaluate whether you need as much space as you’re presently occupying – and if not, consider consolidating operations into a smaller space that will still provide for proper social distancing. Options might include subleasing a portion of the currently occupied space or moving to a smaller and less costly space.
  • Utilities. With reduced staff, are you paying to light empty offices and unused areas, or to power computer terminals that have not been used in months? Savings are to be had by switching off unnecessary lights and powering down equipment that is not in use. Adjusting thermostats to reduce unnecessary HVAC usage is another easy way to conserve cash.
  • Supplies and other Consumables. Do you use the same supplier over and over to purchase office supplies? Many companies do, and never bother checking to see if the prices they are getting are competitive. Regardless of whether you are happy with your current vendor, it never hurts to shop around to see what competitors are offering. If the prices of others are lower, discuss the situation with your existing supplier and ask if they will meet or beat those prices. Even if your supplier is competitive, if you have been a good and loyal customer and your account is current, they will oftentimes cut you a break to keep your business. Consideration should also be given to downgrading what you typically order to see if less expensive products can do the job at a lower cost. Try a less costly brand and/or grade of copy paper and see if it works in your machine. Consider remanufactured toner cartridges instead of new. Buy generic supplies instead of the name-brand. These savings may seem small at first, but they can add up rather quickly. In a similar vein, see if there are expenses that can be eliminated entirely. Do you perchance spend $50/month on disposable coffee cups? Or even $20? Have employees bring in their own reusable mugs, and you will save $240-$600 per year on this “you can live without it” type of expense.

Negotiate Late or Deferred Payments

Another way cash-strapped companies can deal with reduced cash flow is by negotiating a modified payment schedule with landlords, lenders and other creditors. It’s no secret that the pandemic has had a severe impact on businesses of all sizes and types. The creditors your company owes money to are well-aware of the current economic situation, and most would prefer to have a slow paying customer than a non-paying customer. Speak to your creditors and see if they are willing to defer payments and/or work with you to come up with a more manageable payment schedule. Most financial institutions already have programs and plans in place to help customers affected by COVID, so it makes sense to explore your options.

Outsource

In recent years many transportation companies have found there are huge savings to be had by outsourcing their reservations, dispatching, bookkeeping, billing and other operational functions to third party management companies. Thanks to the efficiencies they offer, these management companies can typically handle many if not all of a transportation company’s back office functions. Staffing costs are reduced, as most of the work is performed by the management company’s employees rather than your own. As an added benefit, these arrangements can oftentimes be structured to include office space, which obviously can result in additional savings. If your company still performs its back-office functions in-house, thought should be given to exploring outsourcing as a potential cost-saving option.

Reduce Hours and/or Positions

As I mentioned above, when all else fails a business may have no choice but to reduce staff. There will obviously be reduced payroll costs with a reduced workforce – however, aside from the devastating effect such measures will have on affected employees, slashing staff without fully analyzing staffing needs can have a detrimental effect upon your business. Reduced staffing could result in reduced customer service and affect customer satisfaction.

If you currently have two daytime dispatchers, be sure one can really perform the work of two people if things get busy. Chances are that’s not the case, in which event you might want to consider reducing the dispatchers’ hours/days instead of eliminating one of their positions. That way you save someone’s job and leave open the option of both dispatchers working their normal hours when business picks back up.

Should you ultimately decide you need to lay off employees, it is important that you never imply (or worse, promise) that a position awaits the employee when the pandemic ends. Many employers put in the unenviable position of having to terminate a good employee due to financial reasons will make such statements in the hope of softening the blow. However, there is no way to know when the current health crisis will be over and what staffing levels will be when that occurs. Promising an employee her job back and then not doing so later on could result in a legal claim by the employee that she passed up other job opportunities in reliance upon your statements.

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Article by Lawrence I. Cohen

Laurence I. Cohen is a partner with Pike, Tuch & Cohen, LLP, a Bellmore, NY-based law firm.

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