Why You Need to Reduce Your Overhead Costs

As a small business owner, increasing your profit is the ultimate goal in order to help your business grow. In order to expand and grow, you need to have the capital on hand. Other than taking out a business or personal loan, the easiest way to generate capital — reduce costs.

What Are Overhead Costs?

Overhead costs are business expenses that are relevant to the day-to-day operations. No matter if the business is making money or not, these expenses must always be paid. Common overhead costs include building leases/rent, payroll, utilities, insurance, marketing, etc. Things such as raw materials and inventory are not classified as overhead costs.

Overhead Costs to Cut Down

• Rent - Some properties can have rent that is sky high, which can really cut into your profits. In order to cut down on how much you pay for rent, see if you can renegotiate the payments to a lower price. A landlord that is happy with you as a tenant might be willing to, especially if you sign a longer lease.
• Utilities - Electricity, water, and gas bills can only be cut down by switching to a different provider or by simply using less. Every business should strive to be more eco-friendly. For other expenses like he phone bill, switch from a traditional phone system to a VoIP phone system. Not only does it have more features and benefits, but it’s usually half the cost!
• Payroll - Cutting payroll is never a good thing because it usually means people are going to be let go or wages are going to be cut. However, this is sometimes necessary if a business is currently failing or in a downturn. Choosing to lower all wages by a little in order to save the jobs of everyone can be seen as a positive within the company morale.
• Supplies - While raw materials and final products do not count as overhead costs, other items like office supplies or equipment repair costs do count. To lower these costs, simply use less of these items by relying on virtual documents and upgrade to more efficient models of equipment that require less maintenance.

By reducing your overhead costs, you’ll have more capital in order to help your business grow and expand. For those looking to make the switch to a VoIP phone system, contact Reliable Voice & Data Systems. To learn more or to schedule a free estimate, give us a call at (877) 385-6657.

Don’t forget to follow us on Facebook and Twitter!