Business: How To Reduce Your Overhead

Business: How To Reduce Your Overhead

Anas Bouargane 16/05/2020 4
Business: How To Reduce Your Overhead

Businesses are facing new challenges. It has been a while since companies had to close or operate at subdued levels.

The global health pandemic of COVID-19 is changing the business landscape significantly. Businesses are forced to rethink their cost structure. With revenues significantly diminishing, firms are thinking of cutting overhead costs.

To give it perspective, firms are thinking of how they can reduce rent payments, salaries for employees, the cost of machinery, the cost of accounting and services, administration, insurance, and depreciation. These costs can easily hurt the financial well-being of any firm. What can firms do to reduce their overhead costs? Here is a guide on some of the methods currently being pursued.

Performance-Based Compensation

Firms are restructuring their human resources. They are making hard choices about employee vis-à-vis company welfare. Most of them are choosing to lay off workers. Some are choosing to bring innovative ways of keeping employees at work. Performance-based incentives are changing the way firms respond to their overheads. They are tying all compensation to performance so that if there is no performance, there is nothing to pay. This move can significantly cut salary expenses that are usually fixed. While this has ramifications on the company profile, it is an effective way of ensuring that companies for the services that they have received. It reduces the escalating costs of maintaining a workforce at a time when lean methods are the main source of competitive advantage.

Outsource One-Off Services

Some of the services that businesses pay for internally, such as accounting and legal services, the firm can prefer to outsource. The idea is that these services are essential, but mandatory in the day-to-day running of the business. For example, an accountant can help with accounting paperwork. However, his or her services are only needed when there are auditing and tax preparation documents. Hiring an internal employee for such tasks can be costly.

Periodic inspections can save the company a lot of money because they can spot problems before the problems escalate. Periodic cleaning and inspection can be outsourced. Instead of hiring internal employees to do your cleaning and waste removal, you can outsource the service to dumpster companies that offer the service. They offer cleaning and waste removal at the same time, helping you solve two problems.

Move Online

Using online channels to do most things, such as employee communication and meetings, can reduce the need for inflexible working environments. For example, companies that are implementing online working cooperation can continue offering services to clients while allowing employees to self-isolate at home. While some services cannot be moved online without straining the company, those that can be moved immediately to reduce the cost of running expensive programs.

Invest in SaaS

Another essential saving opportunity is to invest in software as a service. Many companies are already offering the service. Services such as customer service and customer relationship management can be done safely using existing CRM platforms. Many other services such as compliance, social media management, booking, point of sale, among others.


Those manual tasks that can be automated should be automated as soon as possible. You can automate the production systems and manufacturing, which can significantly lower labor costs. You can automate communication between and among teams. Automating marketing services can ensure that everything from sending regular newsletters to manning social media accounts. Instead of buying assets that will quickly depreciate, you can lease them instead. 

Move Marketing to the Digital Front

Instead of opening a second location, or keeping expensive offices for the company, companies are opting to make their website the second location. People can do much more through online platforms than they can out there. With minimal interactions and reduced movement, you can expect people to go to your locations will become rarer by the day. The good thing with a website is that too can add virtually anything you want, including a store, and ordering system, and every safe checkout method. You can close some of the stores that are struggling and replace them with an online format.

Businesses must find ways to reduce overheads to survive the current market dynamics. They can do so by leveraging on technological processes. You can start by moving operations online. A robust website that has full performance is a good starting point. However, doing these things will not be enough. Firms have to dig deeper to look for efficiencies elsewhere. Employees are the most vulnerable because they depend on the income they get from firms. However, firms must decide how well to utilize the resources until when they can afford to retain employees on other terms. To spur performance, firms are opting for safer contracts.

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  • Sam Phillips

    Good, level headed advice.

  • James Mirzai

    Thanks for sharing

  • Eddie Johnson

    Businesses are lost. They must reduce costs to survive.

  • Danny Locke

    Good content

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Anas Bouargane

Business Expert

Anas is the founder of CEF Académie, a platform that provides guidance and support for those willing to study in France. He previously interned at Unissey. Anas holds a bachelor degree in economics, finance and management from the University of Toulon.

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