In the field service industry, there is a fine balance between cost and quality. Delivering high-quality service often involves a high operating cost. Does this mean that field service businesses should compromise with service quality to reduce costs? Of course not. Lowering service quality will invariably result in poor customer satisfaction, which, in turn, will affect profitability. It is a vicious cycle that you must trade very carefully.
Striking the right balance between operational costs and maintaining service quality is the key to a service business’ success. But this balance is rather difficult to achieve, especially for small service businesses. For such organizations, the key to success is smartly managing and allocating your costs.
Your business’ success depends on how efficiently you allocate your costs. Underpricing your services can radically affect your ability to pay overhead costs. On the other hand, underestimating potential overhead costs may drastically affect your profit margins. So, if you want to maintain profitability in your business, you must find a way to strategically reduce your overhead costs.
What is Overhead Cost?
Overhead costs refer to business expenses that are not directly associated with your business operations. Not just these expenses are cutting a hole in your pocket on a daily basis, but overhead costs usually tend to creep up over time. The downside is, this aspect of the business is often overlooked, for these costs are not related to materials, labor, or expenses born to deliver the specific service that your customer requested.
Rather, they are the expenses you need to bear to keep your business running. For example, the rent you pay for your office space takes up a large chunk of your overhead costs. So are utility and phone, internet, and electricity charges.
Believe it or not, your office supplies cost you a fortune if you are still operating things manually, i.e. using paper-based methods. Once you successfully cut down expenses in these areas, you will be surprised to find out how much money you are saving for your business.
If you too are struggling with limited resources and looking for ways to boost your profitability, you have reached the right place. In this article, you will find the most effective ideas to reduce your overhead costs. So, jump right in and start your journey to make profits.
How to Identify Overhead Costs?
Before you start cutting costs, you need to identify the critical expenses to keep your business afloat. To ensure service quality, you must provide your employees with the basic tools and information with which they can continue to provide quality field service.
If you withdraw funds from that department, you will end up losing valuable resource which, in turn, affect your profitability. So, make sure you are reducing costs only where it is affordable.
For a small field service business, there are various kinds of overhead costs that you need to deal with. This includes administrative costs, insurance property taxes, license and permits, professional expenses, rent, utilities, office equipment, and so on.
While they play an integral part in your business operation, they do not have a direct link to your profit generation. So, it is important that you take a deep dive and identify items that are too expensive, unnecessary, or simply could be managed with otherwise. Once you have identified the items, it becomes easier to reduce costs.
How to Reduce Overhead Costs?
If your books are always burdened with trivial overhead costs, it is a huge red flag for your business sustainability. Your cash flow, profit margins, as well as growth prospect will suffer drastically if you are spending way more on your daily operations than necessary.
In this regard, reducing overhead costs is the most effective solution to keep your company afloat. Here are some of the most common yet efficient ways to cut unnecessary expenses.
1. Go Paperless
You may not realize it, but the majority of your overhead costs are going down the drain with the amount of paperwork you handle on a daily basis. Printing contracts, invoices, quotes, estimates, and receipts cost more than you think.
Add the cost of ink, printer, stamp, and envelopes to this, and the amount is horrifying. The horror does not end here. The cost of office supplies tends to add up over time. Now throw the anxiety of losing or misplacing any of those paperwork, along with the expenses meant for organizing and managing all these documents to the mix.
You can easily do away with this entire expense by going paperless. With the rapid growth of digital transformation, this is rather an easily achievable goal. Facilitate online payment, send quotes and invoices via emails, and communicate with your field teams through texts and calls.
Using a paperless business solution, you can manage all these tasks on a single platform. Plus, this helps you manage and keep track of an organized paper trail, saving you time and money at the same time.
2. Hire Contractors or Part-time Workers
Your business requires a lot of work done that is not directly related to your operations. For example, accounting, tax, reception, and even janitorial services count towards overhead.
And you do not need to employ full-time employees and pay them a full salary to get things done. Hire part-time workers, and employ contractors wherever possible. This way, you are not only saving money in terms of salary, but you are also saving money in terms of insurance and liabilities.
3. Leverage Remote Working
As a field service company, your primary workforce will be working off-premise anyway. And your customers will send an email or place a call, or click on your website to request your services.
Under such circumstances, maintaining and paying for an office space with utilities holds little importance to your business. Therefore, moving to a remote working setup could be rather beneficial to your business, helping you save a buck load of money in overhead costs.
According to a survey, more than two-thirds of employees reported that they are more productive when working from home. While your field teams must visit the job sites, you can always allow your back-end executives or managers to run things remotely.
4. Make Training and Onboarding More Efficient
Field service being a very technical field of work, requires specific skills and experience for technicians. This is why employee training holds such importance in this sector. Invariably, it costs a fortune to service companies at the same time.
However, there are certain ways you can reduce overhead costs when it comes to training and onboarding. You can implement Standard Operating Procedures (SOPs) for different levels. Defining SOPs provides uniformity and thus, boosts productivity across employee levels. It also provides your field teams with a singular focus that streamline processes. You can also encourage cross-training in your workforce.
5. Automate Your Processes
Shift to automation wherever you can. This is the ultimate way to reduce overhead costs in any field service business. There are several business software solutions that can help you automate, standardize, and streamline processes. Thus, it takes fewer personnel to manage daily tasks. Accounting, bookkeeping, CRM, invoicing, scheduling and dispatching– there are various software systems to automate these tasks.
Further, you can simply sign up for field service management software to save even more. This software solution automates all your tasks on a single platform, without you having to pay for different software packages. With this digital tool, you can even manage your entire business yourself without having to employ additional staff.
The best strategy to reduce overhead costs is to always stay on top of it. If you are aware of your ongoing costs and understand them properly, it will be easier for you to make quick changes. Plus, it helps you chart the course for your business in terms of growth and profitability.