There were over 30 million small businesses in the U.S. in 2018. About 30 percent of new businesses fail within the first two years.
For a successful business, you need good profit margins. One of the best ways of boosting your margins is to cut your overhead costs.
Read on for five ways to reduce your overhead costs and increase your profits.
1. Consider Your Costs
Before you cut overhead costs, you’ve got to know what they are.
The first step is to use inventory management software. You need up-the-minute data on how much and what inventory you have. Too much inventory on hand leads to cash flow issues.
Your other costs are everything you pay for maintaining your business.
Some examples are:
- Office space
- Technology, such as computers, printers, and phones
- Office supplies
- Perks like coffee, tea, and snacks
Once you’ve listed all your costs, identify the easy cuts. Are your employees abusing the free snacks? You don’t have to eliminate perks altogether, but consider cutting back.
2. Where’s Your Office?
Does your office have to be in the most expensive part of town? Sometimes it’s necessary depending on your business and clientele. But oftentimes, moving to another part of town saves money.
In some cases, working out of your home is a money-saving option. Before making the switch, though, do some research. Check out the zoning laws and regulations.
If moving to a home-based business isn’t an option, check out areas of town with empty office space. You might get a move-in bonus or better leasing terms.
If you’re locked into a long lease, consider subleasing some or all your office space.
3. Look at Your Marketing Budget
Are you spending a ton of money on useless advertising campaigns? Analyze your marketing techniques. If they’re not working, stop throwing your money away.
Offer current clients incentives to refer new clients. This can be done for free or at a low cost through an email newsletter.
If you don’t have testimonials on your website, you’re missing out on a valuable marketing tool. Send out an email asking current clients for reviews of your product or services.
Ask for reviews on local directories like Yelp. Most people read reviews before contacting a business.
4. Compare Insurance Options
Insurance costs are a huge headache for everyone. But most people don’t do an annual assessment of all their insurance costs. Review all your insurance requirements at least once a year.
Talk to your agent. Shop around for better deals on your insurance obligations.
5. Track Taxes
Keeping your taxes down means big savings at the end of the year. Save all business-related receipts. Write down your business expenses. Mileage, gas, and meals are all deductible.
Discuss your taxes with your accountant and make sure you’re getting all available deductions.
Managing Overhead Costs
Managing overhead costs is one of the best ways of increasing profits. Consider your costs down to the smallest detail. Then cut waste and unnecessary expenses.
Ask for your employee’s cooperation and participation. It’s possible to cut your costs by more than 10 percent without affecting efficiency. Be sure your customers don’t suffer either.
Once you’ve implemented cost-cutting measures, make sure they become part of your company culture.
Find more informational business resources here.