If you start to notice a trend where your overhead costs are starting to take bigger and bigger portions of your revenue, it might be time to re-evaluate your spending habits. So, how do you start? The best first step to take is to review everything. Reviewing your most current list of overhead costs and selecting items that are no longer necessary, too expensive, or open to cost-cutting, can help you start your overhead cost reduction journey. It's also good practice to get a good understanding of where you are with your costs before you start cutting cash flows.
There are other ways in which you can start to reduce your overhead costs, however. The following points are also beneficial.
1. Re-evaluate Third Party Contracts
If you rent equipment or pay service retainer fees, then you might be able to find some cost savings by reevaluating your contracts to see if all your needs are still being met. This is especially important if the contracts are older and have not been reviewed in a while. There’s a good chance that with the changes your business has gone through since you first signed, there's room for improvement.
2. Clean Out Your Storeroom
Do you have a storage room or spare office that has become a void of outdated or broken stuff? Clean it out, sell what you can, and utilize that space for something more profitable!
3. Brainstorm With Your Employees
Asking your team or business partners might be a good idea to find expenses that aren't really useful anymore. Sometimes being the one at the administrative end of things blinds you to expenses that aren’t really being used by your employees—these are the expenses that you can cut!
4. Leverage Your Current Client Base
You should already know it’s less expensive to keep current customers than attract new ones—but have you ever used your current customers to attract new ones? Offering a referral incentive or asking for reviews is a great way to have your current customers do some leg work for you.
5. Go Paperless
While you might not be able to go 100% paperless, there must be some areas where you can reduce your paper usage. This will save money on paper, printer supplies, and storage space.
6. Utilize Technology
In today’s world, depending on your business, there's not as big a need for physical storefront locations. You can save a pretty penny by only keeping essentials at a brick and mortar location. If your employees can work remotely, that's another way to save on space and utilities.
7. Assess Your Staff
Unfortunately, as a last resort in the event you're really strapped, you might have to assess your staff and review their individual productivity and value for you and your business.
While it’s almost impossible to run a business without any overhead costs, cutting those costs requires serious consideration and well thought out decisions. Operating costs that can be cut down or eliminated will leave you with more revenue each month, making your business more profitable. A business with streamlined operating expenses will have the best possible chance at growth and long term success.
Our Accounting Firm Can Help Analyze Your Overhead Costs
Chandler & Knowles offers professional business consulting services nationwide. If your company is looking for financial guidance from a team of experts—contact us today.