Overhead costs can vary from business size to industry so there is no magic goal percentage. For instance, privately held retailers average 22%. While consultants and lawyers average 51%.
Some businesses are lucky to naturally have low overhead. For the rest of us though, we need to take steps to lower overhead costs. Here are five tips to help you reduce your business’ overhead.
1. Office and Storage Space
The cost of renting commercial space is usually the most expensive part of overhead costs. Audit your current costs for office, storage or warehouse, and retail space.
Consider both the size and location of your space. You may find that you can save money by either reducing the space or moving the space to another location.
2. Go Paperless
Buying paper and printer ink is extensive. Not to mention the time and effort it takes to keep all of that paper organized. Instead look into taking your company paperless.
If you can’t feasibly have the whole company go paperless, are their certain procedures that can? Discuss with your employees and get their input on how going paperless can be integrated into the current processes.
3. Check Your Third Party Contracts
If you haven’t taken a look at your third party contracts, now is the time. You may find that you have been overpaying for products and services.
Shop around for comparison quotes for the contracts you currently have. When it comes time for renewal, approach your vendor about competitor rates. You may find that your current vendor is willing to match a competitor’s quote.
4. Insurance
You can’t save money by canceling your insurance completely. This would be irresponsible and depending on the insurance, illegal.
But what you can do is evaluate your policy and compare rates. Shop around with different agents. Select the agent that provides the best and most comprehensive service for the best rate.
5. Electricity
There are many different ways you can start saving on electricity. Start by installing motion sensors to control the overhead office lights.
This way you don’t depend on your employees to turn lights off. If no one uses a room for a certain amount of time, the lights automatically turn off.
Create a “computer off” policy for employees. When they aren’t in the office, their computer should be turned off.
Consider hiring someone to perform air vent cleaning. When your air ducts and filters are clean your system won’t have to work as hard to keep your office cool or warm. The less your HVAC system runs, the less electricity you use, the more money you save.
Reduce Your Overhead Costs
Your overhead costs are the costs that you incur while running your business that do not directly relate to production. By reducing your overhead costs, you can improve your bottom line.
The best thing you can do is perform an audit of your current overhead costs. Shop around for alternatives and compare rates.
Looking for more advice on running your small business? Check out more of our blog!
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