There is more than one way to increase your profit and boost your budget even without increasing your productivity. Sure, getting newer equipment, motivating your employees and hiring new people cannot be done indefinitely. Soon, you’ll be faced with a new challenge, and you’ll have to find a way to reduce your startup’s overhead. By reducing your cost of running a business, you’re automatically minimizing the profit requirement for a positive ROI, which is a dream come true for every entrepreneur on a tight budget. With this in mind, here are five tips for reducing your startup’s overhead.
1. Team up with others
What do you do when you encounter an offer to do a project which exceeds your company’s capacities? Do you outsource parts of it or outright reject it? Do you hire more people or rely on freelancers as a temporary workforce? Well, the most budget-friendly idea would definitely be to team up with several of your closest competitors into a business cluster that’s capable of becoming competitive with some of the largest businesses in your niche. Think about it, instead of bickering rivals, you create a buddy system whose effects are probably going to last even after the completion of the project. Needless to say, you also get to do the project without exposing yourself to the increased overhead.
2. Sublease your extra office space
In an ideal world, your office space would be just big enough for your company’s needs. However, how often does it happen that you get the exact amount of space that you need? With future growth in mind, most entrepreneurs lease larger offices, for the time being, in order not to be forced to move at a later date. The problem with this approach lies in the fact that a significant portion of your office space will be unused for months, and perhaps even years. The best way to deal with this expensive practice is to sublease your extra office space to someone else.
3. Create a depreciation schedule
Another thing that you need to understand, as an entrepreneur, is the fact that your assets won’t remain of the same value in the long-run. The lack of knowledge on this topic is what commonly results in some of these assets getting underused or underappreciated, causing a significant downtime in some of your company’s most vital aspects. To avoid this from happening, you need to hire a professional quantity surveyor, capable of creating a depreciation schedule. Finally, keep in mind that no business is too small for such a thing.
4. Pay your bills online
Online bill payments aren’t there merely to make your life somewhat easier but also to reduce your overall monthly expenses. For instance, an average company spends about $12 to pay a bill, whereas, online this can be done with as little as $1.50. This means spending 8 times less money to perform the same function. When you come to think about the number of bills you get to pay over the course of a year or even a decade, it becomes more than clear just how much money you stand to save this way.
5. Rent equipment instead of buying it
Finally, if you’re in a business where equipment gets outdated fairly quickly, you stand to lose a small fortune on the resale value. This means that each subsequent buy gets your company deeper and deeper into the hole. On the other hand, by renting equipment, you stand to pay more in the short-run but gain a much better office innovation maneuverability.
By enforcing these five simple rules, you stand to significantly reduce your startup’s overhead and make your break-even point much closer to your current financial status. A lower overhead also gives you a wider margin of error, seeing as how being barely profitable creates a situation in which a single error can stand to cost you dearly. With these five tips on your side, most of this can successfully be mitigated.