overhead expenses

Simple Ways to Reduce Your Startup’s Overhead Expenses

In the early days, saving a few hundred dollars per month can make all the difference to a cash-strapped startup. There are plenty of ways to save, but the best thing you can do is find ways to reduce overhead expenses.

If you haven’t reevaluated what you’re doing in this area, then something needs to change. You’re most likely leaving money on the table.

5 straightforward ways to trim overhead expenses

Overhead expenses can be fixed or variable. Ideally, you want to start by focusing on ways to lower fixed expenses. This may not always be possible, but doing so will allow you to remain cost effective even as your operations scale. Then you’ll want to turn your attention to variable expenses, which are somewhat easier to manipulate and may become more cost-effective as you scale.

There have been entire books and detailed case studies written on the best strategies for reducing overhead expenses, but let’s just examine a few simple and straightforward strategies small startups, such as yours, can use to free up a little cash.

  1. Use shared office space

Do you really need to lease a massive office space for your small startup? Many small businesses use the excuse that they need room for growth, but keep in mind that it doesn’t cost much to get up and move once you need the extra space. By using shared office space, you can potentially save thousands of dollars a month without really missing out on anything.

  1. Improve your credit score

You know that your credit score is important when it comes to getting approved for a home or auto loan, but did you know that this very personal aspect of your life can follow you into the business world?

As High Risk Pay notes, a high credit score can lower the rates you pay merchant account providers, utility companies, landlords and lenders.

By boosting your credit score, you can actually save hundreds of dollars per month for your business. That’s money that can be poured into important things like research, production and marketing, instead of high interest or excessive security deposits.


Related: How Your Business Can Save Money on Packaging Costs

  1. Use virtual services

There are a bevy of virtual services available to you online, so why not use them? For example, do you really need a full-time secretary or assistant in your office? Just use a virtual assistant who can do the exact same things for pennies on the dollar. Little things like this add up to a big difference.

  1. Hire contractors

Hiring a full-time employee for your startup is expensive. There’s the cost associated with office space and supplies, salary, payroll taxes, insurance and maybe even benefits. A better alternative (and one that’s extremely popular right now) is to hire contractors. They can still work 40 or 50 hours a week for you, but the company technically doesn’t employ them. Both parties tend to enjoy this setup.


Related: Sign up to receive the StartupNation newsletter!

  1. Produce smaller batches

Startups often assume they have some great idea and that everyone in the marketplace will love it. The problem is that you often don’t have a big enough sample size to judge what people really think.

Sure, it may be more cost effective to produce large batches of product, but you also face the risk of getting stuck with thousands of units that you can’t sell. Stick with small batches and then tweak based on feedback. Once you’re sure you have something that works, aim for economies of scale.

Don’t pay more than you have to

Why would you pay more than you have to for services and assets that your startup needs to keep things up and running? By following simple tips and techniques like the ones described in this article, you can free up some cash that can be better used in other areas of the business.

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