Small business owners are always mindful of their bottom line and looking for ways to save money. From overhead costs and insurance expenses, to payroll and real estate, small businesses expenses are a major factor in cash flow and profits.
The key to survival for any small business is to stay profitable, and one of the best ways to help ensure success is to plan for your overhead expenditures in advance.
For many small businesses, some of the biggest costs are payroll and benefits, including expenses like insurance, 401k matches and vacation time. If you own a business with seasonal fluctuations and your staffing needs change throughout the year, you may want to consider outsourcing talent. Avoid over-hiring employees, which can result in you being forced to implement layoffs or incur losses if you become overstaffed.
As an alternative to hiring full-time employees, consider outsourcing some work to freelancers or temporary contract workers. In many cases, with shorter-term or project-based workers you can avoid paying benefits, paid time off or sick days, which can save you major dollars in the long-term.
If you notice your business and clientele become more reliable throughout the year, you can take on more full-time employees and only outsource talent during hectic times when you might need additional help. Instead of hiring another full-time employee to help with the holiday rush, consider keeping one or two contract workers who can help temporarily.
Consider non-traditional office spaces
To save on real estate costs, think outside the box when it comes to your office space. Co-working spaces are rising in popularity across the country—especially among entrepreneurial millennials. A recent Forbes article stated there are currently 11,100 co-working spaces in the U.S., and the country is projected to see more than 26,000 spaces hosting 3.8 million people by 2020.
Shared office spaces are much cheaper than buying or leasing a property, with some monthly membership fees totaling around $100 a month. Or, if your business model allows it, consider allowing employees to work from home to eliminate the cost of an office space altogether. Telecommuting can be a benefit for both you as an employer and for current or potential employees.
Automate where possible
Small businesses have a great opportunity to use new technology platforms to reduce billing and invoicing overhead. Cloud-based billing platforms can help small business owners save an average of two days per month by reducing the time it takes the preform administrative tasks linked to billing, maintenance and invoicing. Evaluate if an automated solution is right for your business and if it can help you spend more time growing your operations rather than focusing time on administrative tasks.
No business can totally avoid overhead costs, but with the right planning and implementation, costs can be streamlined and efficiently managed. Determine which costs are business-critical and eliminate additional expenses that can eat away at your long-term profitability.
Dominic Karaba is executive vice president of specialty lending at UMB Bank.