In today’s economically volatile environment it is vital for small businesses and start-ups to look for ways to reduce business overhead costs while still maintaining efficiency. This is especially important when considering that cutting overheads is one of the fastest and easiest ways to increase profits.
Cutting costs without sacrificing the quality of goods or services is the outcome every business strives toward. This means being careful about how you redistribute company resources and understanding what is and isn’t essential to your brand.
Here are four ways you can minimize overhead costs while increasing profits:
1. Track where the money goes – While this is not always possible, particularly as the business grows, it is important that business owners understand how and where money is being spent.
For example, it’s a good idea to make sure you are well-stocked but not overstocked. Purchasing in bulk is often great for discounts, but storage costs and unexpected market changes can leave you with excess inventory.
2. Outsourcing – This can work for or against reducing overhead costs and requires careful examination in line with your business strategies. Outsourcing can provide great savings on necessary services such as IT, accounting and marketing. However, you may be paying too much for services that are below market quality.
In many cases you may find that hiring a full-time staff member would actually benefit your business. You’ll find that as you grow, your business needs will change. Outsourcing your accounting tasks in the early stages may be the most cost-effective plan, but that could easily change as your company grows.
3. Hire intelligently – Employee remuneration is going to take up a considerable amount of your necessary operating costs. You should not only be carefully considering every personnel hire that you make, but also regularly reviewing their role in the business.
Ongoing training, performance reviews and regular staff meetings are all necessary to ensure you have the best people working for you. To that end, hiring employees to fulfil a range of company roles should always be considered. Conversely, training current staff to be able to handle more than one job function should also be implemented.
You need to keep a tight ship when it comes to staff. Don’t be afraid to terminate an employee that is not performing. Likewise, it may be necessary to let someone go when their position becomes redundant.
4. Go green – Adopting simple, environmentally friendly practices can garner significant savings. This topic is vast and can cover everything from going paperless to telecommuting to save on transport costs. Even installing energy-saving light fixtures could considerably reduce your annual costs.
Reducing overhead costs is an ongoing project. Make sure you schedule regular overhead reviews that examine all your businesses expenses. You may be surprised to find a considerable amount of savings each time you do.