KEEP YOUR OVERHEAD LOW: Reflecting on this basic principle yields big results.
Many business acquaintances of mine are saying that there are several business startups in spite of COVID-19. You would think that the pandemic would halt new business since it has impacted the world’s markets so severely. Apparently the entrepreneurial spirit is not intimidated! In preparation for this month’s article I googled “top ten business tips” for inspiration and found something of interest. “Keep your overhead low”; while this may be basic it is profound.
That jumped out at me because many of my professional friends said something to the same effect when I opened my business. I have been told to know your revenue and costs, how much you bring in vs how much you spend, and to mitigate those costs wherever possible. I have also been warned against credit and small business loans because debt is like a heavy stone. It will crush your business if you cannot control your debt.
Keeping overhead low, to me, is more than simple gross vs net income. For example, if you are considering a franchise you will likely be asked to sign a contract of some kind. This “contract” is the foundation of your business because it affects your revenue. It will dictate how you make money as well as how much money you can make. I was asked to sign a bad deal once. This particular contract took most of my revenue and promised I could make it back with bonuses. I wasn’t comfortable with bonuses being an integral part of my business model so I turned it down.
I also had headaches finding the right office space. Aside from payroll, the lease looked like it was going to be one of my biggest expenses. For one reason or another I could not find a traditional retail space for less than $1,000 per month. In fact, most were closer to $2,000 every month. As a small business with limited resources this looked like it was too much too soon and I wasn’t sure how we would survive. Don’t get me wrong, there were cheap locations but they were in less than ideal conditions. Either the office needed a lot in tenet finishes (which was just another expense) or it was in a bad location. Fortunately I came across a co-working space through Regus. With co-working space we found a great office in a prime location for cheap! We only spend hundreds of dollars per month instead of thousands.
I have joined the ensemble of business owners who sing “keep overhead low.” As I said before, it is basic but profound information. You have to make more than you spend; your family depends on it, your employees depend on it, and your business depends it. Take the time to make smart decisions if you are thinking of opening a business. Look for the best location with the best price possible, don’t sabotage yourself with a bad business model, and don’t spend more than you make.