Running a business requires money. Things are getting more and more complicated for small business owners these days. Competition is increasing and to stay ahead of the game, they must make sure their expenses are as low as possible. When it comes to managing expenses, many businesses have a hard time reducing their overheads.
Overheads are the day to day expenses of running a business. These are the expenses that are independent of the business revenue. In other words, you have to pay them whether your business is going in profit or loss. Leases, salaries, insurance, etc. are some of the overhead costs.
How do you keep the business overhead cost as low as possible? It’s a challenge indeed but there are few ways it can be done. Have a look at 3 most workable ways:
1. Reconsider your company’s structure
The first thing a business must do is reconsider its structure. Chances are you spending too much on staff that is not even required. Of course, you need the best talent but that talent costs money. It is not fair to let the employees eat all your profit margin especially when your business can survive on an undermanned team.
Get rid of all those colleagues who don’t communicate. You need a flexible team. If you can’t afford to hire a new manager, then make use of internal promotion and training.
2. Revaluate your third-party contracts
Take out all the older contracts and reevaluate them. There might be some services you can cut off. It is important to see if they fit your business needs.
Although such an analysis will not decrease the cost of the contract, you will get more insight. Who knows are spending more than necessary?
3. Promote a thrifty culture
Not many employees understand how their wasteful habits affect the performance of the company. You need to make it clear that every employee has a part to play in the success of the business. Motivate them by explaining that the money which was wasted could have gone to bonuses.
Once all employees understand that they must chip in, they will reduce overspending. Make small changes such as switching to a no-paper office setup. Instead of phone calls, encourage them to make face to face conversations. This thrifty culture can save you a lot more money than you can imagine.
Other ways to cut the cost
- Don’t buy; rent instead: When you are buying a property, you will be responsible for paying long-term leases. Depending on the need for property or equipment, why not rent it? Use it for the time it’s actually needed. Save your cash for the time right – when there are more opportunities in the market and the investment actually meets your criteria.
- Promote telecommunication: If you can’t afford an office space, then make the most out of telecommuting. Encourage everyone to work from home. The employees who telecommute are willing to take less salary because they don’t have to spend money on commute. Plus, they get to pick their own working hours.
- Refinance your debts: If you have debt on real estate, machinery or equipment, refinance it. This would give you the opportunity to pay less interest rate. You will also get to reduce the monthly payments. The key is to keep as much cash at hand as possible.
- Cut the travel costs: You don’t have to travel every time to meet a client. Instead of booking airplane tickets and paying the hotel rents, use video conferencing.
Whenever there is a need to travel, then encourage your staff to stay in business hotels instead of luxury hotels.
- Say no to paper: Managing paper is not just expensive but time-consuming as well. Go paperless by purchasing a scanner. This one-time expense can save you from a lot of fuss in the long run. Keep all the files in digital format and make sure they are well organized. This will save you money on administrative costs as well as space.
It should go without saying that you must create a backup of files every day. Personal information such as financial records, customer identification information must be maintained with extra care.
- Sublease your office space: Are there any floors in your office building that you are not using? If yes, then sublease that space to other small businesses. You can use this amount to pay your own rent.
- Use credit cards: You must have at least one credit card for business expenses. It will earn you points for travel, cash back, and other rewards.