Overheads are the costs relating to ongoing expenses required to continually operate the business but exclude the costs associated with the delivery or production of your products or services.
For businesses to have an optimal chance of success, all business costs should be optimised to ensure profitability. Optimising costs has an immediate impact on your bottom line and profitability.
Business overheads would include rent, core technology platforms, staff costs, insurance, etc. These costs recur every week, month, or year, and your organisation needs to ensure it is generating sufficient revenue each month to cover these fixed costs.
Unfortunately, many organisations enter into supplier agreements with little negotiation, which results in higher business costs than needed. Many businesses also are not experienced enough to know the tactics vendors employ to maximise their benefit and not yours.
Contracts are often inflexible and provide little opportunity to make rapid changes as business conditions or business structures change.
The three biggest overhead expenses in all businesses
The biggest overhead expenses in business tend to fall into 3 categories. People, property, and technology.
Whilst these 3 categories seem quite independent, they are, in fact, linked and provide the greatest opportunities for businesses to have the greatest impact on overhead business cost reduction and cost optimisation.
People
People are the most valuable asset in any business; they are the idea generators, the organisers, and visionaries…but they are also your biggest cost. People who add significant value are critical, but equally, people who are not contributing can have other critical impacts in terms of cost to your business. Financial and risk. There are many roles that exist in business that can easily be replaced by more efficient business processes and/or technology.
Property
Rent, services, and management of property represent a significant cost to any organisation. With the recent Covid pandemic, businesses were forced to create opportunities for staff to work remotely. Whilst initially this was a challenge, businesses have realised that having a “cloud-based” workforce is a viable option. Having fixed office space is no longer essential. Technology has underpinned the capability of a remote workforce. Remote is being in-country, or even further away, to lower-cost service centres.
Technology
Every business today is a technology business, yet not all are geared to leverage the technology capabilities and supply chains available to them to provide optimal business value. With technology being one of the largest cost centres (often accounted for across a multitude of business units), there are huge amounts of value ready to be unlocked for the organisation and opportunities to reduce overall business costs.
Intercor's Cost Optimisation Review service helps clients navigate these opportunities and extract savings.
Our Tech-enabled Business Design services help leverage technology to optimise your business for growth and value creation.
Taking a strategic and planned approach to overhead reduction has significant benefits for businesses. When coupled with the other 7 levers for Rapid Business Growth and Increased Business Valuation, your business value can be accelerated.
At Intercor, we are passionate about helping businesses be the best they can be through better use of technology.
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