Have you ever had that awful moment of realisation, that rude awakening when the feeling suddenly dawns on you that…
“This could get expensive!”
We’ve all been there, and we’ve all heard the old saying that you have to ‘speculate to accumulate’, but just how much do you need to lay out before you start seeing a return on your investment?
Well, it depends on a million different criteria, such as what industry you’re in, your geographical location and your budget of course, but let’s keep it simple.
We’re just going to focus on ‘overheads’ for now.
How much you’re spending, to keep you trading.
After you’ve read or listened to this blog, get yourself a plain piece of paper and a pen, and write yourself a list.
Jot down, in bullet point form, all of the things you spend money on, in order to keep your business functioning as it should.
It doesn’t matter whether you’re a freelancer, a sole trader, a partner or a director. You can all have a go at this task, and keep it off the record for now.
I won’t spoil your fun, but you’re going to see general things on there, like ‘stationery’ and ‘tea & coffee’. You may or may not be able to put a figure on costs like these, but try and go a little bit further on your list.
Try and break it all down to the finest detail.
Is your printer ink the most expensive out there?
Are you buying kit kats and blue ribbands for your staff, or is it a strictly ‘Bring Your Own Biscuit’ type business?
At this point, no one is saying whether you’re wrong or right, we just need to see the true price of your overheads, whatever they are.
They may well be justified after all. You probably want high quality printing and your staff appreciate a biscuit with their brew. It makes sense.
But how much does it cost?
Make sure you include things like petty cash and any medical benefits you may have in place, too. These can be expensive, no matter how valuable they are to morale and wellbeing.
Again, we’re not saying you should ditch them, far from it, but you have to have a full and detailed picture before you can start to consider any changes to your overheads.
Often, the biggest overhead cost is the amount that goes on premises.
Offices, warehouses, factories, HQs.
Call them what you want, if you pay rent, council tax, utilities and business rates, where you work is a huge overhead cost to consider.
Many businesses, as we’re seeing on an all too frequent basis right now, find that the cost of having a place to trade from, often proves to be the straw that breaks the camel’s back. There’s nowhere to hide when the rent is due. When these overheads aren’t met on time, it’s usually not very long before businesses close their doors, literally and metaphorically at the same time.
There will always be justifications for the swanky office and the ergonomic super duper swivelly chairs, but these come at a cost.
An overhead that is often much greater than a less fancy office and less super duper swivelly chairs.
We said we’d talk about cutting costs for business owners, so let’s cut to the chase.
Do you even need a premises these days?
Coronavirus forced millions to stay at home, and once the perfect Zoom background options and child entertainment facilities were sorted, many people started to quite like it.
Businesses of all kinds, from banks to bathroom fitters, took their businesses fully online and fully remote, for up to 4 months of 2020.
Now, as the wheels of industry grind back into gear, many are asking themselves whether this should be the way forward. One thing’s for sure, it would cost a lot less in terms of rent, to have people working from home on a more permanent basis.
If it’s good enough for the big boys then, could it be an option for you?
Could you provide the technology and the training, to allow your staff to operate from home? That might just be you, by the way. Do you need to rent office space? To hot desk? Or could you grab an extra half an hour in bed, instead of racing for the train?
And just like that, there’s another overhead cost to add to your list – travel.
It might be the cost of fuel, the lease or insurance on a car, not to mention the upkeep. But hang on, if you work from home, would you even need a car?
All of a sudden, rethinking your overheads can start to make a real difference to the bottom line, can’t it?
But what are the drawbacks here? There have to be some.
Social interaction, accountability, mental health, loneliness, quality control…
Yep, there are certainly some potential drawbacks and sticking points to crossing the word ‘premises’ off your list of overheads, but it has to be worth some consideration at least.
Especially in light of what we’ve all experienced these last few months…
Once you’ve compiled your detailed list, and jotted down the individual costs and the running total, have a go at removing one or two, or amending them slightly, just to see the difference it makes to your overall expenditure.
Some will have a big impact, such as renting an office for instance. Others may only make a small dent on the amount. Own brand digestives instead of Hobnobs, stuff like that.
The truth is, that a combination of lots of little costs will make a significant impact on your overhead costs, and only by highlighting all of them in detail, can you start to see a full picture.
Don’t jump to any conclusions or make any rash decisions though, even if you see huge savings to be made.
As with anything in business, both sides of the coin have to be considered.
Maybe your success is based on the little things.
Free tea and coffee, fuel contributions, an air conditioned, city centre office with free parking and posh toilets.
Maybe it isn’t.
Every business is different, and unless you truly know yours, you could very well be overspending on your overheads, without even knowing it.
At 2080e, we help you get to know your business like the back of your hand.
It’s crucial to your success.
For as little as 28p a day, 2080e may well be something you want to add to that list of yours.
That’s even less than the cheap biscuits.