Cutting indirect costs for your business

One thing that you can do in your business to help reduce costs is to look at your indirect costs. When looking at your indirect costs you can look to see, which costs you can reduce so that your business is earning their maximum profit. Indirect costs are things that are not related directly to your product or service but they are still needed to do business such as heat, lights, and rent.

Here are some of the indirect costs that you can look at to see if you can reduce your small businesses costs.

Number one: Facilities
Rent is probably the largest indirect cost that your business will face. In most cases, there is not much that you can do to save money on this cost because you need to pay a place to run your business. However, one thing that you can do is to evaluate the facilities that you are using for your business to see if you are using all of the space or if you can drop down to a smaller space. If the place is bigger than what you need you are going to be paying extra money for the space that you are not using, by getting into a smaller space you can save a few hundred dollars on rent. If you are using all of the space that is provided in your lease, you can look into extending your lease to get a rate reduction on rent.

Number two: Sharing expenses
If you are not using all of the space in your office building you cannot simply break your lease to get into a smaller location. In that kind of case, what you can do is try talking to your property owner and ask them if you can sublet a portion of the building to another company. This can help reduce your indirect costs because you will be sharing the costs of the office with another company. If sharing the office space you can also talk about sharing the cost of a receptionist and billing person, if it is feasible.

Number three: Utilities
Utilities, such as lighting and heating, are expenses that you are going to need to pay regardless of whether you business is expanding or reducing in size, and most of the time these costs stay about the same. The only way to go about reducing these costs is to make some changes in your business that allows you to reduce the amount of electricity that you are using. For example, convert to fluorescent lighting to save money on electricity, use a high efficiency air conditioner to reduce the amount of energy that you are using, turn off lights and machines that are not being used, etc. You can also reduce your heating costs by installing high efficiency furnaces. You can also adjust your thermostats to help save on heating and cooling costs all year long.

Number four: Shipping costs
These can be considered an indirect cost, but they can also be considered a direct cost because the rates can vary if you do not do a lot of shipping or you can pay a flat rate for shipping multiple items. Talk to your account representative at the company that you are using for your shipping methods to see if you can get a discount on your shipping needs, so that you can lower your cost.

One of the biggest reasons for lowering your costs is that the lower the costs for you the better the prices are that you can give your customers. Some business rather than trying to reduce their costs simply pass their extra costs on to their customers. By reducing your costs instead of passing them on to your customers, you are more likely to retain your customers.