Success Mantra for Small Businesses – Stay Nimble and Turn Fixed Costs into Variable Costs

Posted by on August 3, 2017
Stay Nimble and Turn Fixed Costs into Variable Costs

When it comes to outsourcing, almost all small businesses can deploy a strategy – staying lean and converting fixed costs into variable costs. In a quick-changing business environment, this approach enables you to adapt quickly.

Smart business managers focus on reducing overhead expenses. Financial traps can be kept at bay by scrutinizing fixed costs and evaluating operational costs against projected revenues. You can try and curtail two fixed expenses – those pertaining to personnel and infrastructure.

Transform Fixed Expenses into Fluid Expenses

Businesses often make the mistake of getting locked into large, fixed expenses unnecessarily. Such expenses are largely avoidable. You can transform many of these into fluid expenses. A fluid approach will be advantageous in the long run, keeping your business operational even when circumstances are adverse.

Hiring People Who You Actually Don’t Require

If you hire staff that you actually don’t require, it would only make things unmanageable. When you recruit people, you do not just pay a fixed salary but also make arrangements for their workstations, and arrange for things like transport, insurance etc. In case you do not have any revenue-generating work for them, this would soon be visible in your bottom line.

Outsourcing Helps You Steer Clear of Overstaffing

In outsourcing, you can steer clear of the problem of overstaffing. You can hire people on a part-time basis initially, and later on, as work requirements increase, you can beef up the number of hours that the executives working for you are spending.

Recruit Offshore Employees

Hiring external employees based offshore would enable you to turn your fixed human capital cost into a variable expense. Moreover, this arrangement will be flexible, meaning you can increase the work hours as and when required. When the demand is more, you get in more work hours. When it ebbs, you outsource less. As far as work efficiency is concerned, people who you outsource your work to will not be less capable than the team that you would have otherwise hired internally.

Employees Working on Flexible Basis

Leasing space more than what’s required becomes an eternal money-leaking hole for a business. Getting into a long-term, conventional lease does not suit businesses today. You will be better off having as few regular employees as you can and hiring others on a flexible basis. When you lease unnecessary space, a large part of it remains unutilized. Moreover, it brings along with it the additional burden of furnishing and maintenance. An outsourcing model saves you from such unnecessary expenses.

The best possible approach for a business is to have only that many employees that are absolutely necessary and hire the rest externally. Your customers are not at all concerned about the internal operations of your business. All they want is quality service.

Be Nimble

Whatever be the size of your business, being nimble will enable you to operate profitably. This becomes particularly important for you if you are a small business as your cash reserves won’t be as large as those of a corporate.

Wrapping Up

Flexible operational practices will help you avoid upfront costs. You will able to cut down on unnecessary overheads and pay for only what is required. Technological advancements provide you with innovative ways to create a work model that suits you perfectly.

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