Aug 21, 2023

How To Reduce Overhead Costs in Business

How To Reduce Overhead Costs in Business

Running a business can be very expensive since every little cost adds up. So as a business owner it's important to find ways to keep those expenses as low as possible. Reducing overhead costs is always a great first step.

If you do it right, you can spend less while growing your business and even increasing your profitability. Here are some ideas to focus on.

Tips To Reduce Your Business Expenses

Get Rid of Unnecessary Space

Many times, business owners end up renting more office or warehouse space than they need. You may be thinking about the future, but at the end of the day, you also need to consider your current financial situation. 

You are much better off getting rid of unnecessary space and just looking for more space when you need it. Rental prices for businesses are pretty expensive, so it’s imperative to get rid of that unnecessary space as quickly as possible. 

If you’re unable to get out of your office or warehouse space and need to save costs quickly, consider renting out extra space to help minimize expenses. Be sure to review your own lease and rental agreements first though! You do not want to be in violation of your agreement if it does not allow for subleases.

Embrace Remote Work

Instead of having people that work on-site, you can allow people to work from home. Depending on what industry your business is in, chances are that most of your employees come to the office and work on computers. Allowing them to do just that but from home, further allows you to minimize office rental costs. 

While all of your employees may not be able to go fully remote due to the nature of your business, a hybrid work environment still allows for more flexibility. If you typically have 10 employees in office, but have 5 that can work remotely this is of benefit to you. The space needed to accommodate 5 employees in an office if less than the space needed to accommodate 10. 

The reality is if people work from home you don’t need a large workspace.

If you do it right, you can spend less while growing your business and even increasing your profitability.

Reduce Labor Expenses

For most small businesses labor costs account for anywhere between 50-70% of their business expenses. This is because labor costs go beyond wages. When benefits, payroll, and other taxes are factored in the true cost of having employees are substantial. 

There is no questioning the importance of employees in running and growing a business. So the solution here isn’t to not have any employees. But outsourcing work as a way to reduce overhead just might be the solution for you. 

Consider working with agencies or virtual assistants who specialize in the tasks you need to accomplish. This way you can hire people as you need them, which will help you lower business costs. It can be great to have full-time employees, but you need to guarantee them work and a salary. 

If you just need certain tasks done occasionally, a virtual assistant from All Out Support can be of great help, all while saving money too.

Negotiate Bulk/Business Prices

If your business usually buys anything in bulk, it can be a great idea to negotiate deals for software, licensing, and any other purchases you make. That doesn’t mean you will always have the deals you want, but the return can be pretty impressive, and that’s precisely what you need to keep in mind.

If inventory is part of your expenses, increasing the quantity you order may save you hundreds and thousands of dollars. Most suppliers are willing and able to provide bulk discounts. In some cases your supplier may even be able to offer you more cost effective alternatives.

Review the software and subscriptions you use in your business often. This way you can be sure you're not paying for additional features of software that you’re not utilizing. Or for subscriptions you no longer need.

All of these tips can be constructive if you want to grow your company while lowering overhead costs. You never know how much reducing overhead costs can help until you try it.

We highly recommend giving these tips and ideas a try right away if you’re looking to better manage your business finances!

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