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How to minimize overhead expenses


Every business wants to increase their profits and many people think that the best way to increase your profits is to increase your sales. But there is a small problem with that. If you do increase your sales you are going to increase the costs of running a business because of the increase in the amount of work that is now having to be done. So that leaves with you with one other option, you must lower your costs in order to increase your profit. But rather than looking to lower your variable costs you should take a look at minimizing your overhead expenses.

Difficulty rating: Moderate to difficult


Step one:
The first thing that you are going to need to do is to look at your marketing costs. If you are spending a lot of money on marketing you might want to think about cutting back, this is especially true if you are an established company. If your company is already established you will not need to spend as much money in marketing as you did when you were first starting up your company. Another thing to look for is to see if you can do some of the marketing yourself now that you have a better understanding as to what is needed. Try sending newsletters to your customers by email rather than by mail. You can also send coupons to your customers through an email rather than in the mail. Both of these will help to lower your bills for paper and ink, as well as postage.

Step two:
The second thing that you are going to need to do is to take a look at what business kills you currently have and what your weaknesses are. By learning about the different areas of the business you can actually save money on your overhead costs, even if it is just learning the basics of that department. A great example of this is the computers in your business. Many people spend hundreds of dollars on getting work done on their computers that with a little time and practice you can learn to do yourself.

Step three:
The next thing that you need to do is to take a look at your inventory department. This is an area where more money is lost than any where else in the company. If you do not have a good idea of how inventory works you can end up losing a lot of money. To help save money here you will need to keep track of your inventory that is purchased by using the correct type of inventory method. Also watch how much inventory you are buying at a time, you do not want to have too much on hand because that will lower your profits, but you also want to have enough on hand to meet your customers demands. If you are unsure of how to lower your inventory costs you can hire a consultant to offer you advice on how to lower inventory costs.

Step four:
Now that you have looked at and made changes to the major areas that your overhead costs come from you should take a look at some of the other areas to see if you can't save money on some of those expenses as well. One thing that you should look at is your rent expenses; sometimes it is actually cheaper to purchase a building rather than wasting money on a rent or the lease.

Step five:
Another source you need to look at for hidden overhead costs is outsourcing. If your company is outsourcing any part of their work they should consider doing it all in house so they can lower overhead costs.

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