When times are tough, being able to reduce your business’s overhead costs can really save the day. While operating costs are a necessary evil (it’s hard to do business without paying for real estate, utilities, staff, office supplies, or advertising...), there are smart ways to cut the fat, especially if you’re willing to think outside the box, run a tight ship and excuse the mixed metaphors.
If your business is like most, your largest overhead will be rent. But how well are you using your space? Could you downsize or monetise your real estate if you used it more efficiently?
For baby steps, try engaging with the sharing economy to cover real estate costs:
If you want to try something more drastic, you may be able to switch to a smaller office or retail space, move to a less expensive location, or even set up a home office with employees working remotely.
While those might sound like measures only suitable for very small businesses, they can be an excellent option for medium and large companies, too. Increasingly, businesses like Automattic, which has 930 staff, are going office-free with all employees working remotely. Moving to the city-fringe is also attractive; in 2018 Parkable moved from the Auckland CBD to Morningside, tempted by the larger space, lower rent, and opportunity to be part of an up-and-coming business hub.
Up-and-coming business and social hub Morningside
Some business expenses come up suddenly, and things need to be replaced - your work computer calls it quits, your vehicle breaks down, or a customer spills so much coffee on your cream carpeting that it’s just gotta go. Rather than buying a new model, look into second-hand versions, or if you’re in a place to invest in the future, choose an option that will be cheaper in the long-run.
All Heart NZ furniture and equipment store
Many pricey business activities are now much cheaper - when you do them online. Here are a couple of examples to get you thinking:
Wave - number 1 on the list of 19 free invoicing tools.
Another significant operating cost, of course, is paying your staff. Sadly, it’s sometimes necessary to let people go in order to keep a business afloat. If things are tight but you want to avoid such drastic measures, you could consider different employment options:
For more ideas on cutting hours while keeping staff, click here.
Xero's free guide to hiring independent contractors - check it out here.
It’s all too easy to overspend when you aren’t closely tracking your payments, and aren’t holding yourself to account against a budget. Daily flat whites paid out of the till and staff drinks every Friday? No problem!
Equally problematic is that without a business budget, you won’t be able to answer questions like ‘how much do we need to sell to remain profitable next month?’ or ‘can I afford an extra staff member over Christmas?’ This can leave you feeling overwhelmed, uncertain and paralysed.
To get started on your business budget, have a read through this helpful guide by Xero. As its author Emma Northcote-Green says, “...a budget gives you more certainty and confidence. You get a clearer picture of the state of your business and you know where you stand. It’s like turning on a light in a dark room.”
Smart software Xero recommends to show clearly your income and expenditure.
Hopefully this gave you a few ideas, and maybe even made you think ‘wow! Parkable sounds cool.’ ;)
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