The hard truth about business is that you can have a great product, and still not succeed if your books don’t balance. Of course, the principal reason for this problem is that your company’s outgoings are larger than the revenue you are bringing in. Luckily, by cutting the cost of your outgoing or overheads, you can return order to your finances and give your business a fighting chance of being around of the long term. Read on to find out more.
First of all, one of the most considerable overheads for a business whether it’s a small one person operation, or a multinational corporation are utilities. These are the services that you need to keep your premises open and your employees working such as electricity, gas, water, and of course the Internet.
Happily, utilities are also one of the areas that it is easiest to negotiate on price and therefore save a fortune for your businesses. In fact, there are two approaches to doing this. The first is to use a comparison site to see whether switching your provider from your current one to a new one will lower your monthly costs.
The second is to take the initiative yourself and negotiate directly with your suppliers. This can be more difficult route as it requires advanced mediation skills, and not everyone feels comfortable in asking for a discount outright.
However, it is also probably the best way of reducing utility costs. The reason being that providers will want to keep their commercial contracts with you and that gives you a lot more power in negotiating a better price and so saving money on your overheads.
To run a business, you will need a base of operations. Of course, different types of companies will require different facilities, and these may include offices, warehouses, and manufacturing plants. However, this doesn’t mean that savings can’t be made.
In fact, it’s all about thinking creatively and outside of the box. For example, companies that are considering building a head office may find it cheaper to find a place that it’s already constructed and rent it instead.
While those that need warehouses and manufacturing plants may choose to pool their resources with others in a similar trade to reduce the costs. Although an alternative here is to offer the downtime in such premises out for rent to bring in more revenue.
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Then there is the choice to offer remote working to your employees. Something that many will see as a boon, and that can save you a great deal of money because you will no longer have to pay for premises, or the overheads it takes to run it.
Benefits and wages
While it is fantastic to be able to offer benefits and high salary to your employees, if your business is suffering because of it, it doesn’t make sense. To that end, it’s vital to review benefits and wages and make cuts in line with your financial goals.
One way of doing this may be to swap out a fleet on brand new company cars for vehicles like this used Volvo instead. Yes, it not straight off the forecourt, but it does have an extended warranty, a 130 point check, and will cost a lot less as well making it an excellent cost-cutting choice.
Alternatively, you may wish to make reductions in people salary, although this can be a tricky thing to do. One way of executing this that may come up against less resistance is to freeze pay increases while explaining why, or alternatively move from a full salary model to a commission or performance-based one. The reason being that the latter option still provides an opportunity for your employees to earn a good wage while providing them with some extra motivation as well.
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The thing about office and production supplies is that people just don’t treat them in the same way as they would if they were footing the bill. This can lead to a lot of wastefulness that will cost your business a great deal of unnecessary money.
That is why, if you are looking to slash overheads it’s crucial to get your supply and resources situation under control. One way doing this is to update the tech you use in your company, as this can help you move to a paperless office, as well as monitor productivity much more effectively.
Alternatively, a move to a more eco-friendly position is also a fantastic choice, not only because of the positive PR, from both your public and employees, but also because it can save you a great deal as well.
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After all, it is not eco-friendly to be wasteful with resources, and therefore you can ask your employees to minimise this behaviour for a positive and meaningful reason beyond what they may see as company penny-pinching. It’s a win-win!
Finally, if you are seeking to reduce the overheads that your business pays out, it’s crucial to look at your current insurance premiums. Of course, I’m not saying that insurance isn’t necessary, because it definitely is if you want to protect your business from legal costs, compensation claims, and significant losses due to fire flood, or break-in.
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However, it is often possible to reduce your monthly insurance premiums by taking particular actions. For example, by installing CCTV cameras and adding better security features on doors and windows, you may be able to reduce the cost of your property insurance.
Also, don’t forget that by improving your QA process during manufacturing, the risk that your product with cause someone gram or an injury can be lowered. Therefore your products liability insurance premiums may be reduced as well.
In summary, if you are looking to keep your business afloat during hard times, it is well worth your while to implement some creative tactics that will allow you to cut your overheads. After all, the less you pay out, the more of you revenue you get to keep and record as profit!