3 Tips to Decrease Overhead Costs

It is important when you are starting up as well as scaling your business to decrease your overhead costs as much as possible.

So what exactly is included in overhead costs? Overhead costs are ongoing expenses related to the business. They do not necessarily directly impact profits.

Key accounting concepts related to overhead are what is called fixed costs and indirect costs and are parts of the income statement.

Fixed costs include things like rent, property taxes and depreciation expense. 

Variable costs include things like advertising, marketing, travel, legal and consulting expenses.

You typically do not what overhead costs to be greater than 40%; ideally 30% and below. The higher your overhead costs the greater the risk you have with cash flow challenges, limiting the growth of your business and may run into serious financial consequences.

We want to keep our lights on, right? Here are some tips below to help:

Decrease costs:

Review your current office lease; can you extend your lease arrangement to decrease monthly costs, are your maximizing your office space fully or can you use a smaller space.

Also consider additional costs to your business like your inventory—are inventory expense ordering efficient, e.g. ordered weekly, daily and are their fees for mailing, etc.

Are their considerations for in-house supplement dispensary versus online?

Increase productivity:

Maximize your business capacity and revenue to spread and decrease costs.

Review your current staffing model and see if the schedule is being maximally use; are there things that are interfering with this, e.g. printing issues, paperwork issues, EMR system glitches, phones, scheduling format, etc.

Operational efficiencies

Consider how you effectively use your contractors like marketing, legal and accounting.

Are you utilizing them effectively based on the contracts you have with them and are they fulfilling their requirements?

Do you need to have all of the independent contractor relationships that you have and do they meet the skill requirements needed for the practice?

Also make sure you review your collection process for service fees, ideally before service or time of service; consider the administrative time if you collect fees after service has been rendered.

These are just some quick tips. I talk about this and much, much more in my online coaching program. If interested in having a free strategy session with me, check out www.naturalpreneurs.com