Day 9

Get lean on overheads!

Overheads spell a particular risk for any business because they tend to be fixed costs – you’ve got to pay them even if your turnover takes a dip; rent and rates are good examples, as are fixed salaries.

Some types of buyers (particularly those already operating in your sector) will be able to operate your business with lower overheads than you currently have; that’s simply because they’ll merge your operations into their own and cut out a lot of the duplication. Nonetheless, take a look at your current overheads; what could you get rid of, without it having an adverse impact on the business? And, if you can’t get rid of overhead, can you reduce its cost?

Have you thought about outsourcing some of your current activities? Doing things in-house means you need to be geared up with staff, incurring overheads – they have to be paid, regardless. By outsourcing those activities, you’ll only pay for what you use – so, during a quiet period, your costs will almost certainly be lower. As long as the quality is maintained, and with a good service level agreement in place with the outsourcing company, there’s no reason it shouldn’t be; outsourcing can be a great way of turning a fixed cost into a variable cost – a ‘pay as you use’ service. The more flexible your cost base is, the lower the risk, and a buyer will like that.