• Business Planning
  • April 20, 2019

Hidden SME Overheads: How to Spot and Slash Them?

If the thought of starting your own business is something you've always wanted to do, it's wise to first understand the expenses. Underestimating the costs, is a crucial contributor to business failure.

 

 

Our list of hidden business costs below, can help you get started.

 

 

 

 

How to Spot and Slash Them Hidden SME Overheads?

 

 

1. Permits, Rents, Licenses: It all starts with paper - the permits and licenses to do business. These are rarely one-time expenses and mostly annual and recurring- so, consider the frequency and costs for renewal. By charting this out, you will also be able to avoid penalties.

 

 


2. Office Space and Utilities: The idea of a brand new, dedicated office goes together with the birth of a small business. However, do you need that space? A home office can work for most businesses at least in the initial phase until it takes off. Before renting or purchasing property, think about how much space you need now, and once your business starts to grow.

 


Also, utility costs (electricity, water, internet, phone), cleaning, maintenance can eat into your budget. Consider leased spaces in business centres such as Regus and incubators. Many offer hot-desking with monthly rentals or pay as you go (by the hour or day) and come fully furnished with meeting rooms. You can work when you want, as you need.

 

Why not use those? If you have lot of equipment, material, consider temporary storage facilities, instead of dedicated warehouses.

 


In order to support businesses, we've partnered with Letswork - the UAE's largest community of co-working spaces. Finding a space to work from is now easier than ever. And as a RAKBANK Business Banking customer you can enjoy exclusive discounts on membership packages. Know more about our partners!

 

 


3. Equipment, Maintenance and Upgrades: You need to have the tools to create a product or run a service. This could range from essential office equipment such as computers, copier, paper, scanner, LCD screens, furniture or even cars/trucks or specialized equipment. Where possible, use 'pre-owned', or second-hand items that still have warranty or company certified. You can also evaluate leasing equipment.

 

 


4. Employees and Benefits: Hiring is essential but can also be expensive. You must factor hiring costs, salaries, visas (every two years), security deposits, personal and medical leave, mandatory health insurance, training, attrition into your budget.

 

 

If you fail to properly invest in your employees, provide a clean environment, competitive salary, wages on time, office perks and benefits, it can lead to high turnover. Replacing one member of staff with another can be costly. The financial impact of replacement employees to learn the ropes is a cost. A speedy but thorough recruitment process can limit such costs. It costs about one-fifth of a worker's salary to replace a person when they leave.

 


Consider hiring part-time, interns, contract, consultants where you can. A lot of qualified women, due to family obligations, prefer to work from home, or part-time - consider them. If your HR requirements are on project basis, seasonal or ad hoc then partner or sub-contract with relevant firms. 

 

 


5. Productivity Problems: Anything that interferes with productivity can cost your business. It includes unnecessary meetings, social media, internet distractions, commuting, to email overload. Offer 'work from home' or remote working options, part-time - this keeps costs low and you can scale up based on the need.

 

 


6. Long Payment Times: On an average, SMEs wait 90 days to get paid. Costs mount from SMEs having to put enough by in cash reserves to survive or pay fees and interest on overdrafts and loans until then. If you insisted on 14 or 28-day terms you receive money faster, pay bills faster and reinvest the money in the business. Offer discounts with faster payment terms.

 


With electronic invoicing, from PayPal, Telr, PayFort and others offer customers to let them pay by credit card or instalments - where you get paid in full upfront, but your customers pay over 3,6 or 12 months.

 

 


7. Outsourcing: Move out any manual, routine, clerical jobs that are not core to your business. Keep full-time staff to a minimum and outsource work staff for adhoc, or seasonal work.

 

Bring in freelancers, or move it offshore - from debt collection, tele-sales, customer support, data entry, book keeping, sales, software development and more can be done remotely. All you need is the internet to get work done.

 

 


8. Hire Interns: Use sites such as Gradberry, visit career fairs, run referral programs, offer summer placements with local colleges and training companies. You get young talent, fresh ideas and save on hiring costs for operational, entry-level jobs or those that require different mindset. Many students want to work after college hours, during summer breaks or weekends for experience.

 

 


9. Go Digital: It is a good idea to go digital - from sending invoices, mailers, contracts, save overheads of printing, couriers, filing and it's also good for the environment. Use tools such as Xero, Wave, Odoo, Zoho One, and manage it on your mobile.

 

 

 

10. Barter: Talk to suppliers, customers and use excess capacity, unsold stock, excess inventory, downtime that helps both. Instead of transacting in cash, give what they need and take what you can. Create partnerships and cross-promote. Services such as Bartercard.com, BNI also can help with referrals and leads.

 

 

 

11. Go Open Source: Why spend lot of money on expensive software licenses that are based on per user, per month or for upgrades, training, maintenance and support?

 


From free office suites, email services, photo editing, invoicing, accounting, websites, project management, CRM and more there is a free to use alternative available. Yes, completely free to use, modify and customize exactly as you want with no licensing costs.

 


Category:

No Related Articles
No Related Articles