As a start-up founder, you want to spend as little money as possible. That’s why it’s important to minimise your overhead costs for your small business as much as you can. You need to find ways to reduce your overhead costs so you can use that money to grow your business and community of consumers.
Here is our list of overhead costs for small businesses that will help you reduce expenses and stay on track to expand your new venture.
Review Outgoings
What is the first thing you need to do? Review your monthly outgoings.
How can you do this? Make a list of all the things you and your team spend money on or would like to spend money on if it were available. This can include everything from office supplies, rent, equipment and tools, insurance premiums, software licences and so much more.
From there, decide which items are essential for business operations (such as paying rent) and which ones aren’t (like that fancy coffee machine in the break room). You are bound to find at least a few things that just aren’t necessary.
Assessing and revising your cost expenses regularly helps to eliminate unnecessary expenses and bills that can dramatically impact the growth and success of your small business.
Unsure when to conduct revisions? Depending on your business model, it’s vital to consider monthly or seasonal dates to spend time analysing and reducing your outgoings.
Work From Home
Rent can be expensive! If you can, work from home or at a location that saves on rent, re-evaluating whether you need an office space or physical store can save you huge amounts in the long run.
If you’re in an area with a lot of people and traffic, consider the financial benefits of working out of a remote location where utilities are cheaper or free. Insurance costs money too—and not just to cover employee injuries, but also liability issues.
Find out if flexible working models work for you…
Advantages of working from home:
- Improved work-life balance
- Increase in work efficiency
- Greater work control
Disadvantages of working from home:
- Increased isolation
- Increased home office costs
- Risk of overworking
Advantages of working in an office:
- Increased human interaction
- Become more experienced
- Increase employees understanding towards your small business
Disadvantages of working in an office:
- Longer work commute
- Less independence and flexibility
- Noise and distractions
I’m sure you’ve heard of a shared office or co-working space, but what exactly is it?
This refers to sharing an open plan office space with other freelancers or small business owners. Sharing a working space with independently working persons is a great alternative to traditional office constructs. A co-working space is an environment that allows individuals to work collaboratively in a shared area.
Advantages of a shared office or co-working space:
- More affordable than conventional office leasing
- Provided amenities
- Creates a sense of community within your small business
Disadvantages of a shared office or co-working space:
- Increases distractions
- Limited space
Outsourcing
The first way to lower your overhead costs is by outsourcing, rather than hiring in-house. Outsourcing is a business practice that allows businesses to hire a third-party to perform tasks, daily operations, or services that they may not be able to perform themselves. This means you can capitalise on skills and expertise effectively and affordably.
You can outsource any of the following:
- Office space
- Equipment and supplies
- Employees
- Marketing
Advantages of outsourcing:
- Access a larger talent pool
- Lower labour costs than permanent, full-time employees
- Avoid the employee hiring process
Disadvantages of outsourcing:
- Lack of control
- Issues with communication or quality may arise
Unsure what the differences are between outsourcing and hiring full-time?
Outsourcing tasks can be carried out remotely, anywhere in the world. This means you drastically increase your pool of candidates, expertise, and knowledge. Hiring full-time employees however, can increase their reliability as their attention and skills are solely given to your small business.
Adopt Sustainable Practices
Going green or adopting sustainable practices is not only great for enhancing your brand image but can increase productivity and reduce costs. Efficiency within your small business reduces overhead costs and saves money. As a small business owner, going paperless or making efforts to be sustainable can improve your financial and investment opportunities as you may be able to take advantage of a wider range of grants and funding possibilities. However, going green can be time-consuming and require significant initial investments.
Have you considered adopting sustainable practices? Here’s how you can:
- Work with local suppliers who can deliver goods or services to your business using less fuel and fewer carbon emissions than distant ones.
- Use renewable energy, such as solar power or wind turbines, instead of fossil fuels for your office and manufacturing needs.
- Reduce waste by recycling materials in the workplace and through packaging that you give out to customers.
With these tips, you’ll be able to lower your overhead costs and focus more on your business goals. It’s important to remember that when you are starting, it can be hard to find the right balance between spending and saving money, that’s why My New Venture is here to help. Learn more here.
