Overhead costs are the basic operating expenses of running a business. These costs include fixed expenses such as rent, insurance, utilities, maintenance, employee salaries, and legal and accounting costs, as well as variable costs such as marketing and office supplies. When trying to cut down on expenses, most people think about laying off staff. While that can be an option, here are some other alternatives that can help you cut down on overhead costs without the emotional pain of laying anyone off.
You have several options when it comes to reducing the cost of your rent. If all of your employees are able to work remotely, then one option is to completely get rid of the office and run your business virtually. If you’re set on keeping the office, then it is a good idea to re-negotiate your lease with your current landlord at least once a year. If your landlord refuses to negotiate, moving to more cost-friendly office space is always as an option as well.
You can find other opportunities to cut back on your overhead costs by taking a look at your
marketing expenses. As long as you deliver quality products/services, word of mouth marketing has by far the best ROI as it’s completely free and people are much more likely to trust the opinions of their friends and family over one of the thousands of advertisements they’re sure to see on any given day.
Relying completely on word of mouth marketing might be unrealistic, especially when first starting out, so when you do spend money on marketing, it’s best to invest in the advertising channels that allow you to both track the performance of your ads and target your ads as specifically as possible. As of this writing, Google and Facebook do both of those things much better than the vast majority of advertising channels and they’re both relatively cost-effective, so they’re both worth checking out.
- Additional tips
In addition to rent and marketing, here are several other ways to save on overhead costs:
- Ask your staff if they have any insights on how to save money
- Stay informed of your exact budget in order to minimize waste
- Negotiate with vendors to get office supplies in bulk, instead of paying retail price for them
- Set up an inventory system so you’re not holding on to any more inventory than is necessary
Cutting down on overhead costs can challenging, but hopefully this article gave you some ideas to think about.