The largest expenses for a business are (in no particular order) labor, variable overhead and marketing. We need employees to keep our companies performing and we need marketing to stay relevant in a changing marketplace, but do we need to continue paying exorbitant overhead expenses? Some expenses can’t be helped (such as rent, equipment rentals and utilities), but there are ways to manage the amount your business pays as overhead.
Week 3 – Reduce Variable Overhead
Is your office located in an area that makes sense? Do you need to maintain a downtown address or is it ok to have a smaller office close to home? Is an office space even needed? Determine whether or not you could save by working at home or if you need an office to frequently meet with clients face-to-face.
Ideally, you should also be able to collect all of what you produce within a month. For example, if you sell $30,000 worth of products or services in October, by the end of the month, your earnings should be $30,000. Why is this important? If your overhead averages $15,000 and you only collect $10,000 at the end of the month, you are now facing a deficit.
Did you know that you could preserve the environment while saving money when you move to a paperless and cordless environment? Printing costs in an average office (when you factor ink and toner, paper, envelopes, etc.) may be shocking when it is all added up. Cut the expensive paper trail by storing files and receipts on your computer instead of multiple file cabinets. Many businesses are able to rely on interactive voice communication options to stay in contact with their clients. Solutions such as Google Voice and Skype can be connected to a cell phone or computer and used free of charge.
Here are some additional suggestions to help reduce overhead and other expenses in your company:
- Set a monthly limit on corporate accounts for entertaining clients
- Switch banks if you are paying monthly maintenance fees on your accounts
- Seek out interns for the summer to decrease labor costs
- Renegotiate vendor contracts by asking for better pricing
- Sublease some of your office space or move to a smaller location
What measures will you take to reduce overhead costs in 2012?