November 18, 2017  
 
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Articles for Entrepreneurs

 

Operating a Small Business

 

Reducing Overhead

Written by Rodney Miller for Gaebler Ventures

Is your business overhead too high? We look at how you can decide whether or not you need to reduce overhead and some creative ways to do so.

After a business has been open for a little while, you begin to realize how you are performing.
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If you are exceeding expectations, that is great. You are one of the few that is experiencing great growth out of the gate.

If you are like the majority of small business owners, however, you will be slow at first. If this is the case, it then becomes your responsibility to look at expenditures and see what can be reduced in order to maximize your cash flow.

When you first opened you business, especially if it is a retail operation, then chances are you may have overstaffed or done other things to make your first few customers experience a great one. This is an awesome idea since it can help create immediate repeat customers.

However, this may be a simple way to cut some overhead costs. It should be the case after a couple weeks that your employees are more efficient and can perform more tasks with less manpower since they have become more familiar with how things work and what works best. So you could start by cutting back hours and running a lighter staff during your slower hours especially. By now you should also know generally when your busy times are and should be able to adjust the schedule accordingly.

Other aspects of overhead may also be cut to up your profit margins. Be creative, each different type of business has unique opportunities to save money. For example, in our tanning salon we initially had the air conditioner set at 72 degrees. After realizing that this was no longer necessary, mainly because exiting a tanning bed into even 76 degree air seems like a cool down, we adjusted accordingly. This saved us quite a bit of money on our monthly electricity bill.

A friend of ours who owns several large tanning salons in Salt Lake City and Mesquite Nevada told us that he wished to reduce his power consumption and was considering some ideas. We helped him devise a plan to use two medium sized swamp coolers to compensate for the air conditioner when it wasn't running. This way less power was used and the same effect of cooling was felt by customers.

There are many other ways you can be creative and save money. Try installing an insta-hot water heater. They have no tank and only heat on demand thus saving money if you use a lot of hot water.

A simple way anyone can reduce energy consumption is to open the blinds and turn some lights off. Just make sure it is not an inconvenience for your customers and you will be grateful when the bills come.

Rodney Miller is an experienced entrepreneur who likes to write about entrepreneurship. He has started numerous businesses, including a tanning salon and a landscaping company. Rodney is currently studying business management at Park University.

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