The average small business spends around 20% of their turnover on administrative overheads. These overheads might include rent costs, utility costs, staffing costs, cleaning costs telephone answering costs plus much more. If you could reduce these costs by 10% or more then you could potentially add a sizeable amount to your bottom line.
Many of the costs that are included in your overheads will be fixed costs that have to be paid out every single month. Regardless of how much work you have on or whether you are heading away on holidays you will have to pay out these costs. If you are looking to cut down on your overall overhead spend then it is a good idea to try to convert some of these costs to variable costs.
Before you start cutting costs you need to have a really good idea of exactly what you are spending and why you are spending it. You need to question all of your costs, question why you need to have specific staff and what is the market rate for all of the people that you have employed.
You need to look at all of the roles that you have in your organisation and ask what value they are adding. Are they necessary in earning income or are they absolutely necessary in your back office. Can you outsource some of the roles to turn that fixed cost into a variable one.
If a role is not critical to the operation of your company or the role is only performed occasionally then there may be opportunities to outsource it. Also, if a role is relatively unskilled (eg receptionist)then there may be an opportunity to achieve your goal without a staff member.
If you can turn your fixed costs into variable costs then it makes it much easier to manage. A good example would be outsourcing your telephone answering. You pay more when things are busy, but during slow times your costs are much lower and more in line with your revenue levels.
Employing your own staff can be expensive. Not only are you up for all of the direct costs but you are also liable for indirect costs like super, holiday pay, long service leave and more. With our virtual assistants you pay for what you need, only when you need it.
To really get an idea of what you can save and which costs you need to target you need to create a working budget for your business. The budget needs to use your current P&L to project out what you believe that you can save. Once you have your budget in place you need to review it regularly.
It's no use budgeting if you don't review your performance against that budget. You should do this at least quarterly if not monthly. You should also ensure that you do what you have targeted in the budget otherwise you will never get to cut those overheads down and increase you businesses profits.