Keeping Overhead Under Control
The costs of running a small business can seem daunting, but there are ways to save on overhead expenses without compromising your company’s bottom line.
Being a small business doesn’t mean having small expenses. For example, small companies with fewer than 20 employees spend nearly twice as much per employee per year than larger companies to comply with federal regulations, according to the Small Business Administration (SBA).
The overhead expenses that are necessary for a business to function do not directly generate profits, but they do affect a business’ bottom line. The challenge for most small businesses is to minimize overhead expenses — such as rent, supplies, telephone, travel, taxes and utilities - without cutting the costs of potential sources of revenue, such as employees and marketing materials.
Since a small business’ survival typically entails finding a balance between income and expenses, keeping overhead costs low can be critical to a company’s long-term success. To do so, start by analyzing your current expenses, then identify ways to reduce overhead and, ultimately, free up additional capital for your company.
Here are some saving strategies you might want to consider:
Look for opportunities to negotiate. Business owners should negotiate on everything from equipment and supply costs to rent and product returns. Without attempting to negotiate, you could be missing an opportunity to cut costs.
Telecommute.The number of Americans whose employer allows them to work remotely at least one day per month has skyrocketed during the past few years, according to a recent report issued by WorldatWork1, an association of human resource professionals. With fewer people in the office, a business can save on some of the day-to-day expenses such as long-distance calls, paper, ink, other office supplies and even electricity. Aside from saving money on everyday supplies, many employees have reported feeling more productive when they’re able to work remotely. With an increase in production and a decrease in overhead expenses, telecommuting is an option worthy of most small business’ consideration.
Buy in bulk. Buying everyday office supplies in bulk or from a mail-order wholesaler will help save money. Remember to stock up on the items that you’re always running out of, such as toilet paper, notebooks, paper clips and trash bags, for example.
Network. Word-of-mouth is often the best form of free advertising. But the conversation about your business needs to start somewhere, somehow. An effective and inexpensive place to start is through networking. Not only is networking with other businesses a great way to create company awareness, but it also provides an opportunity to trade leads, swap mailing lists and barter with other businesses about certain services you could offer each other. Organized networking events are typically inexpensive, and most are conveniently scheduled before or after normal office hours. You are your own best advocate, so use whatever free forum is available to promote your business and learn what works — and what doesn’t — from other businesses.
Re-evaluate your facilities. If you’re leasing an office, it’s often possible to decrease your monthly rent by extending your lease. Discuss this option with your landlord or property manager and be sure to only rent the space you need. If there are other, non-competing businesses next door, you could also discuss with them the possibility of sharing certain expenses, such as a receptionist or supplies. These shared costs can help to keep your overhead costs under control.
If you’re a start-up, hire the right number of people. Employees are typically the largest expense for most small businesses. Hiring too many people could mean having to deal with expenses such as severance pay and additional benefits. Begin by hiring the minimum number of employees and then gradually build from there in order to avoid putting additional strain on current staff members.
1 Report by WorldatWork based on data collected by The Dieringer Research Group, “Telework Trendlines for 2006,” August 2006
Also In This Issue
- Mouse Calls
- Are online physician consults the 21st century’s house calls?
- Benefits Offer Flexibility
- Robust benefits programs can increase employee loyalty and reduce turnover.
- Keeping Employees Up When the Economy is Down
- Here are some tips to help you motivate your staff when times are tough.