How to cut costs by reducing overhead
Starting up a business is an expensive venture. Many people don't realize the high costs that often go into starting up a new business. Expenses like advertising, equipment and machinery, office space, and licensing and fees to make your business legal all add up, sometimes turning out to be more money than expected.
However, these overhead costs don't necessarily mean you have to take out a loan or deplete your life savings in order to start your business. The following are some ways you can cut costs by reducing your overhead:
Hire the right number of people.
Your largest expenses will typically be your employees. If you hire too many people, you will have to go through expenses such as severance. Look at your busiest times and days and figure out the number of employees you will need by averaging the two. Start with the minimum amount needed without compromising on service or making your employees work longer or harder than you need to.
If you have a seasonal business, or experience more business during a certain day of the week or time of the year, consider hiring part-time or seasonal employees.
Reduce training costs.
Training employees can be expensive. Offer employees incentives to cover the costs of their own training and certification by offering other perks to them, such as paid time off or additional vacation time. You could also offer to pay part of training instead of all.
You may also be able to cut your overhead costs by bartering your services with others. For example, if you are opening a bakery and need printing services for your marketing materials, you might be able to work out an arrangement with them by offering to cater their next employee function. Many companies are willing to barter their services in exchange for other work.
Reevaluate your facilities
If you are leasing your building, you may be able to cut overhead costs by talking with your landlord or property manager. Sometimes, you can lower your monthly rent by extending your lease. Don't get a space that is more than you need, or you will literally paying for unused space.
You may also want to join with other small, non-competing businesses to share expenses such as receptionist and office costs. This can greatly reduce your overhead costs and is an excellent option for businesses just starting out.
As far as utilities go, you can cut overhead by doing such things as converting to fluorescent lighting and using high-efficiency heating and cooling equipment that can cut down on your monthly costs.
Most businesses cannot afford to buy all of their own equipment in the beginning, especially if they have a highly technical business. By renting instead of buying your equipment, especially computers or specialty equipment, you can greatly cut down on your overhead costs.
Call on friends.
If you have friends in certain areas, don't hesitate to call on them and see if they can help you. For example, if you have a friend or family member who sells insurance, you may be able to get a better rate. Consider who you know and what they do when thinking of cutting overhead costs.
Overhead costs can quickly add up. However, these are just a few of many ways you can save money and cut costs by reducing your overhead.