Cutting Costs Without Cutting Corners

A Contractor's Guide

by Devon Osborne

Read it to me! Click the video below.

 

Running a successful home services business is no easy feat. Whether you’re a roofer, landscaper, plumber, or electrician, your bottom line often depends on how well you manage your overhead costs. Overhead is that sneaky expense pile that includes everything from rent to insurance to office supplies, and it can quietly eat away at your profits. Here’s the hard truth: if you’re not actively reducing overhead, you’re likely leaving money on the table.

 

The Common Overhead Pitfalls

One of the most challenging aspects of overhead is that it’s often not directly tied to revenue. You might be shelling out money for things that don’t necessarily contribute to lead generation or job fulfillment, and this is where things get tricky.

• Office Space You Don’t Need: As remote work has become more common, many contractors are still paying for large office spaces that sit empty for most of the day. According to a study by Global Workplace Analytics, businesses can save as much as $11,000 per employee annually by allowing remote work.
• Excessive Equipment Costs: Some contractors hold on to outdated or underutilized equipment, thinking that one day it will be needed. In reality, this equipment often requires maintenance, storage, and insurance—all unnecessary costs.
• Unnecessary Staffing: Are you hiring full-time employees for jobs that could be handled by part-time workers or independent contractors? Many small businesses fall into the trap of over-staffing, which inflates payroll costs.

Identifying these areas is the first step in slashing your overhead.

 

How Overhead Hurts Your Business

Overhead eats into profit margins, and for service area businesses, this can mean the difference between growth and stagnation. When overhead expenses rise, contractors are often forced to pass these costs on to customers, which could make your services less competitive.

Take, for example, a roofing company that held onto a large office space even after half of its team moved to remote work. They paid $2,500 a month in rent, utilities, and other expenses for a space that wasn’t fully utilized. When business slowed down, the overhead costs remained. The result? They had to increase service prices by 10% to cover the difference. The competition undercut them, and they lost several key clients.

On the flip side, a competitor that embraced remote work downsized their office, cutting costs by over 50%. This allowed them to maintain pricing and attract new business, ultimately gaining market share.

 

Solutions to Slash Your Overhead

So, how do you trim the fat without cutting into the muscle of your business? Here are some proven strategies:

• Embrace Remote Work: If the pandemic taught us anything, it’s that many jobs can be done just as effectively from home. Downsizing or eliminating office space can significantly reduce rent, utilities, and even office supply costs. Encourage teams like customer service, admin, and accounting to work remotely.

• Lease or Rent Equipment Instead of Buying: Renting equipment or sharing it with a partner business can save you significant capital. Not only do you avoid the hefty upfront cost, but you also eliminate ongoing maintenance and storage expenses.

• Outsource Non-Core Activities: Outsourcing functions like IT, payroll, or marketing can save money and allow you to focus on what you do best.

• Use Technology to Streamline Operations: Invest in software that automates tasks like invoicing, scheduling, and customer relationship management (CRM). While there may be an upfront cost, the long-term savings in labor and efficiency make it worthwhile. According to HubSpot, 75% of businesses that implement CRM systems see an increase in sales productivity.

• Review and Renegotiate Contracts Regularly: Don’t just accept annual increases in rent, insurance, or vendor agreements. Negotiate better terms, or shop around for more competitive rates.

• Consider Variable Staffing: Instead of hiring full-time workers, consider a mix of part-time staff or freelancers for busy seasons. A small landscaping company saved $25,000 annually by hiring part-time workers during peak seasons and reducing hours during slower months.

 

Take the First Step Today

Overhead reduction doesn’t happen overnight, but every little step counts. Evaluate your current expenses, identify unnecessary costs, and create a roadmap for reducing them over the next six months. Implement one change, whether it’s embracing remote work or renegotiating a contract, and track the results.

Take action now, and watch your profit margins grow!