How Entrepreneurs Can Control Costs Answers
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They say to me, “How can you maintain your overhead? How can you reduce your overhead so that I can focus on what is going to make my business successful?”
My response is always the same, “You can’t.
There is nothing you can do to reduce your overhead in an efficient manner. You can increase your overhead, but it’s never going to be low enough.”
If there was such a thing as an "optimal" way to run a business, then every business owner would be employing it. However, there are no such things as optimal businesses.
Every business owner needs to choose the course of action that will provide the greatest amount of ROI. In addition to choosing your business’s course of action, what are the tools available to an entrepreneur to reduce their overhead?
Not every business owner is fortunate enough to have an accountant on staff. But if you do, then they are a big help in managing your cash flow.
I recommend every business owner get a good accountant. But if you don’t have the luxury of having a certified accountant on your payroll, don’t worry.
There are many ways to reduce your overhead. And here are the 3 most popular options:
1) Produce a profit & loss statement
If you don’t know how to produce a profit & loss statement (P&L) then you should hire a bookkeeper to do it for you. I can help you do this for $100. You just need to write down your expenses and the income and calculate your net profits.
However, if you don’t already have a P&L (or you’re not sure if you need one), it is a good idea to sit down and do it.
But let’s be honest. There is so much to do during the day that I don’t think anyone should spend their entire day calculating your P&L.
But if you want to do it and you know you can do it quickly, then do it. It will help you understand your business and also determine where you should focus your attention.
Then you will need to spend the next time you have down time creating a more detailed P&L. The cost of this will vary depending on how detailed you need it to be. But it will generally run you between $75 and $150.
2) Pay yourself a salary
This is one of the best ways I have found to reduce your overhead. Paying yourself a salary will allow you to make sure that your financial house is in order.
A lot of times, it’s easier for a business owner to spend their paycheck on things that are not going to benefit them in the long run.
Pay yourself a salary to make sure that all of your financial obligations are met, such as business taxes, retirement accounts, etc.
You will need to create a budget for your financial obligations so that you can pay yourself a salary. But this is definitely something that should be done.
If you want to use a personal checking account, then create a budget and stick to it. If you want to create an online business bank account, then create a budget for your business account.
Pay yourself every pay period. Once your income exceeds your expenses, you should take the extra cash and use it to save or invest.
This will allow you to save money and increase your net profit as well. If you don’t want to use your bank account, then you can create a special business account at your local bank.
But the bottom line is that if you want to reduce your overhead, this is the easiest way.
3) Allow yourself to take a vacation
Most business owners are self-driven. They do things because they think they should do them.
But it is important to take breaks. Take some time off.
A week off at a tropical island. A month off in Africa or Asia. It doesn’t matter.
Just take a vacation. This will allow you to recharge your batteries.
Your mind and body will thank you. Although, it may not seem like it at the time.
But your business will thank you. If you go on a few short vacation during the year, then you are saving yourself thousands of dollars in hotel bills and other travel expenses.
Taking breaks from your business will also give you a fresh perspective on it and will make you better at it. More importantly, taking breaks from your business will allow you to spend time with your family and friends.
Spending time with your family and friends is more important than ever right now. The next time you are with them, ask them how they are doing and really listen to their answer.
Don’t just take a cursory glance at your phone and think you are listening to them. This is something that I still struggle with.
It’s not that my family and friends don’t want to talk to me. They just don’t know what to say.
And I do the same thing to them. After a few months of going back and forth with myself, I will ask how everyone is doing and really listen to their answer.
Then I change my perspective. I change my perspective and I begin to live life again.
4) Be mindful
Being mindful of what you are spending your time on is important. You will need to be mindful about what you are doing in the business and how you are spending your time.
A lot of business owners spend their time on non-business related activities. For example, I used to spend a lot of my time on Twitter and reading other social media sites.
But it was time that I could have been doing other things that I could be doing to increase my business. It’s important to be able to take care of yourself as well.
A lot of time is wasted on social media sites. Spending time on Facebook and other social media sites is addicting.
Before you know it, you have wasted a few days on your business. But you have also wasted a few days with your family and friends.
Spend your time on things that will increase your business instead of just getting distracted with this technology. Keep your Twitter and Facebook settings as a limited time window.
It will allow you to limit the time that you spend on social media and it will help you not become a social media junkie.
5) Have a sense of adventure
As the owner of a business, you have the ability to change your business by being intentional about it.
This change has the potential to grow the business. It also has the potential to make your business a bit of a liability.
It’s important to be able to keep an open mind.