As the saying goes, “It takes money to make money.” With this in mind, overhead is considered one of the costs of doing business. The sooner you accept that fact, the better you’ll run your business.
With that said, out-of-control overhead is an easy way to lead to business failure. While eliminating overhead costs is impossible, finding ways to reduce them is essential. Doing so prevents slim margins while also boosting profit potential.
Of course, reducing overhead costs is easier said than done. It’s difficult, but not impossible. Let’s take a look at six ways to effectively reduce overhead costs for your business:
Invest in technology
There are various forms of technology that can be harnessed as a way to reduce overhead costs. Cloud-based software, tablet computers, and automation tools are just some of the ways to streamline your business and lower costs in the process.
While these and other forms of technology are a hefty upfront investment, the one-time purchase and occasional upgrade will still be much less than running a business without them. With that said, unnecessary tech upgrades will not help you save money. Assess your current situation to determine the best technology to invest in going forward.
Outsource customer service
Companies have been outsourcing customer service for decades as a way to reduce overhead. Now it’s your turn. Fortunately, you don’t need to foot the bill to assemble a dedicated team of agents and representatives overseas.
Thanks to virtual receptionist services, small business owners can have affordable and reliable customer service through an outside company. These professionals get trained regarding the ins and outs of your business with minimum investment on your end. The savings will be significant.
Switch to remote work
The global pandemic saw millions of professionals switching to remote work. While some business leaders saw this as a threat to company culture, the majority recognized the cost-saving benefits of having their employees work from home or wherever they prefer. The lack of office space – and all the expenses associated with one – will lead to immediate savings. If your business can function in a remote setting, consider making the switch as a way to reduce overhead.
Assess your marketing ROI
Many business owners make the mistake of spending money on marketing without understanding the return on investment. Scrutinize each marketing channel to determine whether or not it’s leading to increased sales. Seemingly effective strategies might be going nowhere, while sleeper campaigns are driving the bulk of your sales. By eliminating ineffective marketing, you’ll make a major dent in your effort to lower overhead costs.
Hire a business accountant
Small business owners have a lot on their plates. While taking time to reduce overhead costs is worth the effort, it takes away from your ability to tend to the business itself. With this in mind, it might be beneficial to hire a business accountant to help you sort out what should and shouldn’t be on the chopping block.
They’ll also do a better job at sifting out waste and other expenses that are difficult to detect without the proper expertise. Furthermore, having an accountant confirm the financial benefits of cutting certain expenses will reassure you that it’s the right move to make, whereas you might otherwise second-guess yourself.
Cut back on non-essentials
It’s critical for small business owners to do a self-audit of their operation at least once per year. Go line by line – item by item – and think hard about whether or not it’s worth the cost. Chances are there’s always something you can get rid of without it being detrimental to success.
It could be something as simple as canceling a magazine subscription in favor of cheaper digital copies getting sent to your inbox each month. It could also be something significant, like deciding a second location is not worth keeping open. There are essentials, and there are non-essentials; it’s your job to know the difference and make the executive decision regarding their fate.
It might take money to make money, but profit margins rise and fall on the difference between the two. Business owners – especially those running smaller organizations – are expected to keep overhead costs as low as possible in order to ensure maximum profit potential.
Julie Steinbeck is a freelance writer from Florida. She enjoys covering topics related to business, finance, and travel.