I hate it when certain bills come to me every month, especially bills from NEPA, Diesel and fuel expenses.
E dey bite me ehh. [It bites me to my bones]
Does that happen to you too?
– Staff salaries, etc.
These are called overhead costs.
Overheads are the costs that a business incurs in running its operations. Overhead costs are usually fixed and are not flexible. They are not things you can control like other expenses.
Excessive overheads can ruin your business.
I remember a business owner who was in the distribution business.
Her monthly revenue was averagely 40 million naira.
Cost of goods was about 33 – 35 million naira. Her overhead costs were between 4-6 million naira, excluding other costs.
She didn’t have a business. She was just funding transactions
High levels of overheads could end up eating into your profits and leave your business in a position where you blame village people, but it’s not them.
HOW DO YOU MANAGE YOUR OVERHEAD COSTS?
1. Take a look at what you’re spending money on and ask yourself if
it’s really necessary for your business.
Are there quick fixes that can be made?
Are there services that can be outsourced?
Are you over staffed? Can you offer two roles to one person and increase the person’s salary?
How can you manage your power? I did a post on this long ago.
Click here to see it. https://web.facebook.com/photo/?fbid=10158954969401267&set=a.39914081266
2. When you find some excesses, do your best to cut back.
We use inverters in our Port Harcourt office. It has helped us reduce our costs on power.
Some banks changed their closing time nationwide to 3pm from 4pm when the price of diesel was ridiculously high.
Instead of maintaining an expensive huge office in the city, you get a smaller office in the city and then move your production factory to the outskirts of town.
Overhead costs can mess up your business.
Don’t ignore them.