Small Business

Ditching the Overhead

Michael M., owner of a small electronics import business in northern New Jersey, has seen his profits drop as end users of technology products continue to pinch pennies and stores buy less from him to avoid over-stocking.

Michael now realizes that he needs to re-think spending on his large warehouse and office space and focus energy on marketing his services and products in a way that encourages both his direct clients and end users to spend. So, he has started to re-fashion his business to eliminate his need for warehouse and even office space, let him work from home and gets electronics directly to stores from manufacturers.

For example, industrial space is dramatically less expensive—both to rent and to purchase—than commercial space.

A lot of small business owners have started to think about alternative locations for their companies, and new business models that will help them survive through the recovery. Here are some of the cost-cutting ideas they’re implementing.

Set up a working home office. Setting up a home office is one of the best ways to cut overhead costs and avoid taking out additional loans or paying large monthly fees in rent or mortgages. While not every small business can be accommodated by a home office, many are very well served by this type of arrangement. For example, if you are an IT or computer consultant, a management or business consultant or own your own real estate or insurance company you can probably work very efficiently from home because most likely you are doing much of your work at client sites or remotely via phone and e-mail. To help separate your work and home life and keep everything professional, make sure you invest in a separate business phone line as well as high-speed internet access and a business e-mail address.

Sublet office space. Whether you have outgrown your home office or simply need or have had to cut your losses on a current piece of commercial property, subletting office space can be a viable option that can also help you keep your shirt. Of course, you will still have to pay rent, no matter how the economy fluctuates. But according to InsideCRM.com, subletting office space can help you avoid extra bills and contracts that arise when you’re your own office.

Invest in industrial rather than commercial space. While industrial space may not always be aesthetically as appealing or “move-in ready” as commercial space, it can be a real money saver. Regardless of geographical location, industrial space is dramatically less expensive—both to rent and to purchase—than commercial. Because industrial spaces are often used for many different purposes, leasing agents and real estate brokers tend to be flexible when negotiating industrial space lease and mortgage terms.

Choosing an appropriate company space has become even more of a challenge for small business owners in tough economic times; but there are a lot of creative space and business plan options that can help them ride out the recession.

Tags: budgets, office, real estate, Small Business