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Reducing small business overhead

charttwo30340387.JPGOverhead normally consists of debt that a business owes to creditors and other individuals. Your overhead is basically everything that it takes to run your business. You need to pay your employees, you need to pay your insurance, you need to pay your suppliers, etc. All of your accounts payable are generally considered your overhead expenses. To save money, small business owners can find ways to decrease their small business overhead, here are some tips:

Tip # 1 - Reduce Inventory
Your inventory is one of the biggest overhead expenses your business will have. Many small business owners will purchase materials in bulk because they are under the impression that they are getting a better deal for their money. If you sell the products quickly, this is true. For most businesses, they purchase too much and it sits in inventory for too long, tying up their cash flow.

Take a look how you can reduce your inventory. For example, if you sell bookmarks, consider printing them together instead of separately. This will save you money on printing costs and you have the ability to print them when your customers demand them. Review your inventory often to determine which items need to be phased out and which items are the hot-sellers. Even though you may think it's wise to carry a lot of your hot-selling item, be careful. The market can change at anytime and before you know it, you are left with a warehouse full of dusty products that used to be hot-sellers. To phase out some of the older inventory, combine them into packages with other items. This is a great way to still get some of your investment out of them and you can promote some of your other products. When you reduce the size and cost of your inventory, you free up your cash flow so you can use it on other things like purchasing of new equipment.

Tip # 2 - Partnership and Negotiations
Another great way to reduce your overhead is to consider partnering with another company. You can use one another when you have marketing promotions and other events. This is a great way to scale back on the amount of money you spend and it provides you with the opportunity to expose your business to a new audience.

Negotiations can also reduce your overhead expenses because you are trading services with other companies. Instead of paying your vendors cash, re-pay them by trading services. For example, a fast-food restaurant can trade their food for auto repair services. This way both parties get what they want, you just need to make sure the trade is fair.

Tip # 3 - Price Check
To reduce your business overhead, start looking around for other services. Price check your insurance rates and utility bills. These expenses always seem to increase over time and you can get a great rate with a new company by asking for a price quote. Use this approach with some of your suppliers. This helps them stay on their toes so they know they cannot get away with increasing your price all the time. If you find a better price, ask your supplier to match it, 85% of vendors will price match in order to keep your business.

Tip # 4 - Shipping Expenses
Although you may be getting a good deal from some of your vendors, take a look at how much money you are paying in shipping expenses. There are some instances when you can save yourself a ton of money by shopping at Sam's Club and Costco and office supply stores. While the price may be a little higher, it will be cheaper in the end because you don't need to pay for shipping.

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