You started your Internet business in hopes of growing and becoming profitable. Now, that you’re starting to achieve your goals, you want to continue maximizing growth, but you need to be careful to do so without increasing overhead. When it comes time to sell an online business, overhead can reduce the attractiveness of a company. By reducing overhead in smart ways that improve the efficiency of your Internet business in the years leading up to a sale, you can improve your financials and one day reap the benefits in terms of getting a lucrative selling price.
Here are six ways that you can lower overhead and grow revenue:
- Reconsider Your Office. If you never meet with clients face to face, paying rent for an office location may be an unnecessary expense. Unless you own the building and can consider it an asset, think about whether or not you truly need an office. Could your employees telecommute or are you a family operation that could easily be run from your home? Would an office sharing service or shared office space that you rent as needed be an option?
- Recount the Number of Heads. How many employees do you currently have? Now, how many do you really need? Reducing your head count or keeping it a fixed number is an excellent way to keep overhead to a minimum. If someone resigns or is let go, consider whether or not you actually need to fill the role. Could any process or technology be used to reduce the need for a single person to do the job? How could tasks be redistributed or re-delegated to eliminate the need for the post without overworking the other employees? Only fill vacant positions that are absolutely essential and consolidate job roles whenever possible.
- Make Smart Replacements. Are all of your employees contributing to the success of your business? In many companies, there is a bottom tier of performers that don’t pull their weight and contribute to productivity. Identifying these people and focusing on their performance can help you improve productivity and increase growth. You can start with interventions and coaching to improve their performance, but don’t be afraid to let go employees that truly are not up to par. If you can replace them with people who will perform like your best employees, you can greatly improve efficiency and productivity without increasing overhead.
- Incentivize Employees. Often times, providing incentives to employees to improve their job performance costs very little in comparison to the revenues gained. Whether you set targets for reducing office waste, increasing productivity or growing sales revenue, you can offer simple rewards that cost little to nothing and can lead to big improvements in the performance of your business.
- Introduce New Technologies. Many Internet business owners make the mistake of foregoing the introduction of new technologies due to their cost; however, new software or processes that can allow you to reduce head count, perform tasks more efficiently or eliminate waste can pay for themselves over time. An example would be converting to a digital-only environment. While you may need to purchase better scanners and optical recognition software for the transition, over time, the reduction in paper purchases and improved efficiency can offset these costs greatly and actually lead to a reduction in overhead. Because improvements in technology may take some time to produce results in terms of lower overhead and increased growth, it is best to make these types of investments a year or more before you intend to sell your online business.
- Renegotiate with Suppliers. If you have an e-commerce store that retails goods or you manufacture goods for sales online, reconsider how you do business with your suppliers. One option is to renegotiate to have your terms more closely tied to your inventory levels. This can force your suppliers to work with you to ensure that you’re turning your inventory more efficiently. Another option is to work out just-in-time agreements. With these arrangements, you only pay for inventory when you sell it or need it to produce new goods. This can allow you to reduce your warehousing costs, greatly lowering your overhead.
If you plan to sell your business within the next 2 years, meeting with an online business broker now is a smart idea. A business broker that specializes in the sale of Internet businesses can help spot other potential opportunities for improving your company’s financials through overhead reduction and revenue growth. Give us a call today to learn more.
