3 Ways to Reduce Your Overhead Costs

October 17, 2012
If you’re in the manufacturing business, you continually watch the costs and profit margins of your products, but what about your overhead? Unlike direct costs like materials and labor, which fluctuate with your production volume, your overhead expenses typically don’t vary from month to month. These expenses, like rent, utilities, depreciation, insurance, and other similar fees, don’t typically reflect changes in production volume. Cutting dollar bill with scissors, Fishbowl Inventory BlogWhile many of your overhead expenses may seem fixed, today I want to share three things you can do to reduce your overhead and boost your bottom line!

Manage Your Contracts

Whenever a contract expires, there’s a potential to save money. Oftentimes, landlords and suppliers automatically expect an increase in price when the time comes to renegotiate contracts, but that shouldn’t always be the case. Shop around with competitors to see if you’re paying too much for things like rent, trash collection, Internet connection, and other utilities. It never hurts to have more information to bring to the table.

Be Proactive and Not Reactive

Don’t wait until things break to invest money. Whether it’s a shipping truck, a computer or a piece of manufacturing equipment, lots of expensive items in your business will naturally wear and slowly become less efficient. If you continually budget money for preventative maintenance and replacements, you won’t find yourself with broken equipment and not enough money to fix it. Also, you should consider selling some of your older equipment rather than running it completely into the ground. That will help you transition to newer equipment and experience less downtime.

Clean House and Remove Waste

Doing a periodic check of all aspects of your business can eliminate waste buildup and save money. Waste can pile up everywhere from inventory items that sit on the shelf to excess office space that doesn’t get used. Take a look around your business and ask yourself how you can trim some of the excess.