Overhead costs. Every business has them, and every business would like to find ways to reduce them. Although overhead costs are critical to operations, they are rarely tied to revenue. Regardless if sales are up or down, overhead costs always have to be paid. Like most business leaders, you’re probably looking to keep overhead as low as possible without sacrificing efficiency or quality.
Trying to make widespread cuts to your company’s overhead usually isn’t the best approach. It’s better to consider cutting back on one or two to start, and then monitor the impact.
Today, let’s look at some ways businesses can lower overhead costs while still maintaining a healthy operation.
Review overhead costs regularly
It’s easy to get so caught up in day-to-day operations that a business loses focus on whether it’s spending wisely. That’s why it’s important to review your overhead costs periodically. When you do, you’re likely to find several line items that don’t make as much sense as they once did.
For example, you may be using redundant technologies. Or, maybe you have older equipment that’s costing more to maintain than it’s returning on value. You might be buying office supplies from a traditional supplier when an online retailer offers them for much less.
Another area to keep an eye on is your third-party contracts. Review all your contracts regularly, particularly the ones you’ve maintained for a while. See if you can renegotiate better terms, combine or bundle some services, or drop some services altogether.
Scale to size
Physical space, including rent and utilities, plays big in the business budget. Can you negotiate a better deal with your landlord for the current space? Or, could you make a few changes to fit in a smaller location, like telecommuting?
You might also consider outsourcing some functions to trim your square footage requirements. If the company owns its space, assess whether there are areas you could put to better use. For example, an outbuilding storing old equipment could be leased out to another small business.
Re-evaluate your core competencies
As your business grows, so does its complexity. When you add more employees, your HR needs become more complicated, and so do your accounting and technology requirements. As your back-end operations grow, you may need to add equipment that is costly to maintain. And if sales are booming, these escalating overhead costs may go unnoticed.
If your business is experiencing these growing pains, it’s time to consider outsourcing. Outsourcing services like assembly, kitting, packaging, or fulfillment can help ease your team’s workload and allow you to focus on the core competencies of your business. By outsourcing work to a third-party provider, you convert a fixed, overhead cost into a variable cost. Outsourcing can also help to protect your business from downsizing. If sales go down, you can always scale back and reduce the work you outsource.
Limit hiring expenses by outsourcing
One of the most significant business overhead expense is payroll. A new employee’s salary is only the beginning of the extra cost. There is also the total compensation package to consider. This can include employer-paid health insurance, vacation, and retirement plans besides payroll taxes. But when a company chooses to outsource, they gain access to a bigger pool of talented workers, without the need for these overhead costs.
Ready to reduce overhead costs? Try outsourcing with Goodwill!
If you’re looking for outsourcing services in Cincinnati, you may find that switching to Ohio Valley Goodwill will help reduce your overhead costs. We have decades of experience providing expert assembly, kitting, packaging, and fulfillment services.
As a non-profit organization, we’re committed to helping your business improve while fulfilling our mission to change lives in the Greater Cincinnati community. Partnering with Goodwill is an opportunity for your business to improve its bottom line and make a difference in the lives of individuals with disabilities and veterans.
What’s the best way to understand the Ohio Valley Goodwill difference? Read the testimonials shared by a few of our business partners! We’re proud to help these local organizations improve their processes while reducing overhead costs.
Learn more about Ohio Valley Goodwill’s outsourcing services in Cincinnati. Contact us today for a free quote and a free tour of our facilities!