Cutting Your Overhead Costs

Business.com / Strategy / Last Modified: February 22, 2017

Expanding overhead - all of the expenses not directly related to making your product or delivering your service - is a dangerous thing. ...

Expanding overhead - all of the expenses not directly related to making your product or delivering your service - is a dangerous thing. Here's what you need to know:

  1. Even in the smallest business, it tends to grow, slowly and unnoticed, until suddenly your costs are out of control.
  2. Bloated overhead is one of the major threats to small business competitiveness. Conversely, low overhead can be one of your best competitive weapons.
  3. Cost-creep is often insidious. You add a seemingly minor cost here, and another there, but eliminating costs once you've added them is far more difficult.
Office space is a good example. Do you have more or higher quality space than you need? Moving to different digs might save you a bundle in overhead costs, but it's inconvenient so many small businesses don't bother. Keeping overhead under control is a good reason to stay in a home office or other startup space as long as possible.

Get more free business tips at BizBest. 

Cut energy costs

Energy costs are soaring, especially if you run a manufacturing firm. Energy Star, a government-backed program that helps businesses cut energy costs, is a terrific source of free help. The Web has detailed advice on how small businesses can cut energy costs and calculate savings.
Energy Star small business web site, start with the list of "Simple, Sure Energy Savers."

Get better control of your inventory

The costs of carrying excessive inventory, or the wrong inventory, can be crippling. Specialized inventory control software for small business can help.

Compare rates for a better insurance deal

Have a business insurance agent review your policies. InsuranceNoodle is a terrific Web site for getting pricing information and proposals on a full range of small business insurance products.

Don't waste money on waste

Small business costs for waste removal are skyrocketing. A smaller container, less frequent pickup or other measures could save you money.

Cut phone costs

Look into Web-based "VoIP" phone service, which may be much cheaper than what you use now. Vonage is a leader provider.

Get employees involved

Employees often know best where your business is wasting money. Enlist their help in your overhead reduction drive, and offer rewards for the best ideas.
  • Review all dues, subscriptions and memberships your business has. Eliminate the ones you don't need. Avoid automatic renewals.
  • Get a grip on express delivery costs. Excessive overnighting of packages is one place many small businesses waste money. Coordinate outgoing shipments through one person.
  • Professionalize your purchasing. Neglecting vendor relationships leads to unnecessary expense. Review each product or service you purchase - no matter how small - as a potential source of savings.
  • Avoid overstaffing. Set you staffing level to meet minimum, not maximum needs, without compromising quality or service. Bringing in temporary help or paying some overtime will be cheaper than having too many employees.

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