As your profit margin is calculated by comparing your sales against your expenses, sometimes it’s easier to cut expenses first and then up your sales. And today’s fast moving tech has made cost-cutting a competitive field. New timesaving software is dreamt up every day – Notion, Asana, Quickbooks – and other digital tools are becoming cheaper and more accessible. In fact, you may even be able to find lower-cost or even no-cost alternatives to some of the business tools you’re currently using.
How else can you cut down on your company overheads? We’ll be providing you with seven great answers to that question today.
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7 Ways To Reduce Your Overheads
1. Adopt New Technologies
As we mentioned, you’re highly likely to find plenty of low- or no-cost alternatives to a lot of the business technologies your organisation utilises regularly. Nowadays, you can find plenty of open source software to trial, or even free tools from reputable software providers. For instance, Adobe Acrobat is a free PDF editor that can also be used to complete a range of dynamic PDF editing functions, including digitally signing documents. And you can do all of this totally free of charge – no need for premium editing or design software.
And generally speaking, modern problems require modern solutions, right? So why not take this tip one step further and see which programs, machinery, or management styles can further support your adoption of newer, low-cost technologies. For example, some cafes are transitioning to takeaway-only, while still providing seating areas. Why? Because they no longer have to own or replace cutlery, plates, or pay dishwashers. Every sector is seeing new innovations crop up, so have a look around and online to see what you can adopt to improve your productivity or efficiency.
2. Rent Instead Of Buy
Buying anything upfront requires a commitment of capital. Renting on the other hand, allows you to keep your capital for use elsewhere. This is known as opportunity cost.
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Would your money be better used securing your ownership of something, or invested into your business elsewhere? That’s the question you should ask whenever you’re considering a major purchase, and more often than not, it’s better invested, because that will speed up your businesses’ growth (and hopefully your profits too).
3. Keep Your Team Lean
Every new team member requires vetting, onboarding, paperwork, equipment, and more. Similarly, there’s plenty of research to suggest that having a high staff turnover rate can be detrimental to your company’s profit margins. So when you’re looking to grow your business, you should be investing in your team just as much as your other assets.
When you’re considering a new hire, see if you have someone on staff who would be willing to take on some added responsibility. It could mean having your cashier take a barista course, or bump a staff member up to manager, but it’ll be more cost effective than hiring another team member. That, and providing these upskilling and career progression opportunities will provide your existing staff with more purpose and passion at work.
4. Reduce Your Energy Costs
Lightbulbs, fridges, computer monitors, and practically everything that uses electricity comes with power-saving alternatives. We recommend switching out your old halogens for energy-efficient LED lights – an investment that’s being made across North East India, from office spaces and even to street lighting.
Another great tip here is to get your team to turn power-saving mode on for all their devices, and see the power bill plummet. It’s also important to know which of your appliances use the most energy – like your heating and cooling systems, which should be used sparingly. Understanding what energy input is required from all your office devices and equipment can help you ensure your office uses these resources optimally.
5. Go Paperless
Another major change that we’re seeing in industries across India (including in government offices and events like the Meghalaya Legislative Assembly) is swapping out paper for digital alternatives. Naturally, printing paper costs money, and using digital tools for documents is virtually free and no-waste by comparison.
And it’s also not just office spaces that can make this change. If you run a cafe, you can make your receipts digital. If you’re a small business, you can make your business card a QR code on the back of your phone or a photo to airdrop. The added benefit of going paperless is that you can enjoy the feeling of being eco-friendly too.
6. Outsource As Much As Possible
Unless you’re a major conglomerate, outsourcing particular responsibilities may be cheaper for your enterprise than expanding your internal team. Outsourcing your warehousing costs less because they’re working at scale, and have staff working for multiple warehouses. Outsourcing customer service is cheaper because you can pay by customer query. Even minor things that you and your staff are doing during their work day, like compiling invoices can be outsourced for less.
So consider your options and outsource – but be sure to outsource responsibly. This means doing your due diligence and making sure that the professionals and consultants that you’re outsourcing to, have extensive experience providing the tailored services you’re after.
7. Review All Overheads
Finally, your company’s operational costs can evolve over time. That’s why it’s imperative to examine every overhead cost routinely, and reprioritise wherever necessary.
This can be done by ranking every operational cost from most expensive to least. You may have to translate some into monthly costs, but once you’re done this will be your to-do list. Work your way down item by item and consider how you could reduce each one. Could you hire a cheaper warehouse? Could you transition to a hybrid workplace? If you’re not sure how to reduce a specific overhead, look online for help.
Keep in mind too that not all overhead costs are equal. For example, there’s no way for you to change the cost of a Netflix subscription, but you can change the amount you pay for electricity each month. These are fixed overheads and variable overheads respectively. The last type is a bit of both, the semi-variable overhead. For example, maybe you pay a base cost for renting your warehouse each month, but you’re also paying a sliding expense for crew wages depending on how often you use it.
Conclusion
Cutting down on overheads is like trimming a topiary: don’t get too eager, or your business will suffer – but be attentive and keep everything in line, and you’ll be rewarded. Be sure to stay in the loop with emerging technology and methods in your industry that can help keep you ahead of the curve, and your business can stay agile and will enjoy that much more time in the green.