Expanding overhead can be poisonous to small businesses, especially when it goes unnoticed. As businesses grow, they’re bound to spend more on upgrades, inventory, salaries and more. Unfortunately, all too often, overhead costs become bloated due to a lack of oversight or inefficiency. As seemingly minor costs add up, profits inevitably go down, until the company is struggling to stay competitive and viable. If you’re interested in squeezing the most profit from your small business, learn how to lower overhead costs; so you can give your company the best possible chance to succeed.
Profits vs. Costs
Most small business owners tend to focus on attaining more customers and/or sales; however, as the old adage goes, a penny saved is truly a penny earned. The following strategies can help your business increase its profit margins by lowering insidious overhead costs that are sucking your company dry.
- Lower discretionary expenses. Discretionary expenses refer to all to the expenses that are not necessary in order to run a business. Such expenses include bonuses, entertainment expenses, marketing expenses etc. While they are all necessary to keep our staff satisfied and increase the exposure for your brand, it is also necessary to learn how to control them and keep them in line with your revenue.
- Outsource. Many small business owners struggle to stay profitable, because they spend too much on in-house employees. Outsourcing can offer substantial savings on important services, such as marketing, accounting, IT and more. Additionally, in some cases, outsourcing can actually increase profits. For example, when companies work with answering services, they tend to enjoy higher customer satisfaction, because callers aren’t frustrated by long hold times and voice mail systems. What’s more, because answering services provide customer support 24-hours a day, seven days a week; businesses don’t lose out on potential sales just because their in-house employees aren’t at work.
- Monitor your inventory. Buying in bulk is a great way to save on inventory costs; however, sometimes, this strategy can backfire, especially if storage costs run high or changing needs result in waste. Likewise, inadequate or incorrect inventory may result in delayed shipments and other unforeseen issues. Carrying incorrect or excess inventory can be a crippling problem. To ensure that your inventory is where it should be, invest in inventory control software which will help promote efficiency and organization.
- Claim all tax deductions in full. The federal government offers all sorts of tax credits and deductions to small business owners; however, thousands fail to take advantage of everything they should. While some business owners maintain accountants and tax experts to help ensure that their companies aren’t missing out on tax breaks; many have no choice but to handle their finances by themselves. In this case, it’s important to stay abreast of the seemingly ever-changing U.S. tax laws. To ensure that you are benefiting from all potential tax breaks, consult the Internal Revenue Service’s Small Business and Self-Employed Tax Center to view an up-to-date guide to tax legislation on small businesses. You should also consider hiring a part-time preparer who has experience filing for small businesses. Additionally, for small business owners making less than $49,000 per year, the IRS offers Volunteer Income Tax Assistance Programs, which provide free tax help from trained local volunteers; and, for business owners making less than $58,000, the IRS offers no-cost access to Free File: its very own tax filing and preparation system.
A Complete Strategy for Success
Smart business owners know they must invest in their companies to promote growth and greater profits. That said, unorganized, wasteful spending is akin to a cancer which may threaten a business’s very existence. To promote sustained profitability, it’s important to make sure your company is lean and mean; so trim the fat by cutting where you can and encourage long-term viability by making smart investments that will ultimately lower costs.
Guest Post: This post has been contributed by Cassie Lummus on behalf of http://www.answeringserviceunited.com/.