You have to spend money to make money. This statement is true for both investing and running a business. If you are an entrepreneur or a decision-maker at a company, then you understand what overhead is. These expenses are necessary to run your business, but they also make it difficult to balance the budget and achieve profitability.
No company can exist without some amount of overhead. Between utilities for the building, computing needs, advertising, insurance, supplies, taxes, travel expenditures, and everything in between, the cost of doing business is high. Maximizing your business resources often requires minimizing your operating costs, especially overhead expenses.
Since it is impossible to run a company without overhead, all you can do is try to reduce these costs as much as possible. Here are a few ideas for doing so to increase profitability without sacrificing productivity.
Rent Your Workspace Rather Than Buy
Buying a commercial building can be expensive. If your business owns the building, then you are responsible for upkeep, utilities, and other ongoing costs that add to your overhead. When you rent a commercial space for the workplace instead, there are fewer costs associated with doing business there. Plus, not having to cover a large down payment other than the first month’s rent will be a much lighter load for your budget to carry. It also gives you flexibility in case you need a new office arrangement soon.
Energy-Efficient Building Improvements
Let’s say you already own the property that your company works out of. In this case, reducing your utilities is a great way to lower overhead costs. It will just require some upfront capital. A new HVAC system could use power more efficiently while still maintaining a comfortable environment. Energy-efficient windows can improve insulation so your HVAC does not have to work as hard, lowering utilities. Better lighting can increase work productivity while also saving money on power. You could even go as far as installing solar panels on the roof of the building to reduce your electrical costs in the long term. These improvements can also be an asset if you ever sell this commercial property.
Embracing Cloud Technology
In 2023, most businesses rely on a fair amount of computing power to run operations. Your brand is probably no different. However, hosting a local server network and keeping up with maintenance costs can significantly increase your overhead. Cloud computing allows you to skip the local servers and only pay for the computing power your business needs. No more server maintenance costs and no more buying new servers as you grow. Instead, you simply rely on remote servers and the assistance of a firm like GSI if you encounter any questions about your cloud services.
Shifting to Remote Work
It is expensive to own a building and pay for utilities. Depending on the type of industry you are in, it may be possible to switch to a remote work environment, which would save a ton of money on property expenses. You could always move to a smaller location or rent a space to accommodate those who must be on-site or prefer in-office work setups. However, if you have remote positions, you can save a lot of money by hiring more remote workers and downsizing the physical space that the company uses.
Outsource Certain Tasks
When your company has a specific need, such as accounting personnel, it can be very expensive to hire an entirely new employee to handle those tasks. Rather than spending all that money on a salary and benefits, it makes far more sense for your bottom line to outsource this responsibility. There are plenty of other areas that can be outsourced as well, including customer service, marketing, and IT management.
Invest in Automation
Automation is a huge topic in the business world. Companies that invest in it are becoming far more efficient while their counterparts are still weighed down by unnecessary busy work. Automation can be integrated into marketing, customer relationship management, point-of-sale systems, and much more. Taking advantage of this innovation can save you money since employees will be able to spend more time on other important tasks. A more productive and efficient company can save money on overhead, and automation can have a huge impact on the functionality and speed of business operations.
Cutting Costs Means Greater Profitability
The goal of any business is to make money. When revenue and operating costs are equal, profitability has not yet been achieved. If you, as the business owner or executive, can find ways to reduce overhead without sacrificing revenue streams, then you can quickly move the company from breaking even toward collecting net profit. Analyze how the organization conducts its business to decide if any of the above initiatives could reduce overhead and improve profitability.