What’s causing high overheads for your business? You’ve gone through your accounts and found some pretty bleak figures. The money entering your company is dwarfed by the money leaving it. You’ve been on a tear recently in a bid to make more sales and increase revenue, but those overheads make it impossible to see anything close to a profit.
So, what are the main reasons for this, and how do you stop them from being a problem? Some might already be blatantly obvious to you, but others remain hidden deep within your business, which is an issue because you keep overlooking them. Don’t worry because this guide will explain some of the biggest causes of high business overhead costs and how to sort them out.
Staff Turnover
Terrible staff turnover rates compound many businesses with financial headaches. You might not recognise this at first, but the costs of re-hiring employees are extensive. If someone quits of their own accord, you don’t have to deal with any severance fees, but you’re still forking out cash on:
- Promoting the open job role
- Conducting candidate assessments and interviews
- Onboarding new employees
Not to mention the things you can’t necessarily quantify, like a dip in productivity and overall output because you’ve got new people coming aboard and unsettling the ship. It’s a massive expense that rocks your overheads, but there’s such an easy fix.
You need to reduce staff turnover, which means finding ways to keep your employees for longer. Start things off with some employee engagement surveys to receive proper feedback and understand what your employees like and dislike about your company. This is the best way to make changes that appeal to your workers and make them more motivated and happy. Thus, staff turnover goes down, eliminating a huge expense from your overheads.
Your Massive Salary
It’s time to face the facts: sometimes, you’re guilty of causing the massive overhead expenses in your company. How? Because you’re pocketing a substantial salary from your business’s profits, which eats into your overall bottom line. It’s a common occurrence, and you may argue that this is your business, so why shouldn’t you deserve a big salary?
Obviously you have to pay yourself, but when does it become too much?
There’s a fantastic article about learning how much to pay yourself as a business owner that’s worth diving into if you have some time to spare. It goes over the best way to ensure you’re compensated favourably without wasting too much of your company’s money. You’ll also learn tips on things like paying yourself through dividends instead of a wage packet to save money on tax.
Oftentimes, cutting your salary by even a small bit can help your business save loads of money and slash those pesky overhead costs.
Overlapping Subscriptions
Your business subscribes to many things, and they’re normally all software-related. The average business may have software subscriptions for:
- Accounting
- Marketing
- Budgeting
- Human Resources
- CRM
- Time-keeping
- Productivity management
Add as many things to this list as you please, but consider one main thing: do some of your subscriptions overlap with one another? You might pay a monthly fee for one application that includes some features that are present in another app that you also pay for.
The best example of this is when you pay for marketing software but also have access to a CRM system. Many of the best CRM systems for businesses include marketing features, so you don’t actually need to pay for a separate piece of marketing software. You’re essentially paying for the same thing twice, so by cancelling the marketing software subscription, you may save thousands of pounds a year.
Go through all of your subscriptions and see if any others overlap. If you find areas where you can combine two subscriptions into one, then go for it. You’ll save money and make it easier to manage your business.
Inefficient Marketing Expenses
While we’re talking about marketing software and all that jazz, it makes sense to mention your marketing budget as a whole. Is it as efficient as it could be? What you tend to find is that many companies waste money on marketing tactics or ideas that either don’t work or aren’t generating the best ROI.
You get sucked into paying for things like traditional TV adverts because you think it helps you gain national exposure. But are you really seeing results from this campaign? You must conduct a full-scale marketing audit to go through everything in your marketing budget and analyse whether or not it’s worth spending money on.
It will stun you to learn how many things you’re wasting money on. From there, you can reduce your marketing expenditure by focusing on things that legitimately pull in results, which lowers your overhead costs.
Unnecessary Office Costs
We’ve saved the biggest culprit for last. How much money is your office costing your business every month? A detailed report by Hubble HQ found that the cost of office space in the UK ranges from £80 to £646 per month, per desk. It stands to reason that the existence of your office suggests you have more than one employee, which means you’ll have multiple desks.
On the small end of the scale, a five-person business could cost anywhere between £400 and £3230 a month.
But here’s the crazy thing: that doesn’t take into account the cost of utilities. You may add another hundred or so pounds onto your rental bill per month, which means the costs soon get pretty out of hand.
Why is this such a problem? Because office costs are often unnecessary. Do you actually need to work in an office? Can’t everything be achieved remotely, for a fraction of the costs, and with a cheap virtual address for professionalism? Check if you actually need an office and consider introducing remote working options because it will save a ton of money.
That leads us to the perfect conclusion for this post. These are the five biggest causes of high business overhead costs, and you’ve now seen what you can do to sort them out. Address the issues to tighten your budget and make your business easier to handle because you’re no longer spending far too much money on things that don’t provide benefits.