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8 Effective Ways to Reduce Overhead Costs

Your overhead costs are parasites eating up your business little by little if not kept in check. Those forgotten subscriptions, unnecessarily high rents, inefficient employees, and internet charges leak all your revenue without you even realizing it. You certainly need to spend money to earn money, but you can avoid these pitfalls that hamper your company’s growth. There are many ways to decrease overhead expenses, increase profit margins, avoid cash flow problems, and keep your business afloat even through economic downturns like the one we’re experiencing these days. All of your business’s recurring costs that do not directly impact the production are overhead costs. Office rent, maintenance, employee payrolls, management and marketing charges come under the tag of overhead costs. It is a good practice to keep your overhead costs in check throughout the year, but economically unstable times and low revenue seasons, require more action on cutting overhead expenses to a minimum. Let’s dive deep into ways to reduce overhead costs without damaging your growth or quality. 1. Analyze A Deep Analysis of your Business’s Revenue Before you get on a layoff spree, do an in-depth analysis of your revenue model and your bottom line. Go through your profit and loss statement line by line, and examine what might be a waste of money. This would allow you to cut out funds going towards things you don’t necessarily need. Metric develops the profit-loss statements for you while giving weekly, monthly and yearly cash flow reports, which limits this lengthy procedure to merely minutes. This occasional check keeps you aware of your financial health and spending trajectory. Revisit Costs After a period of big growth and profits, be careful to revisit all costs and make decisions based on updated data. While reviewing, mark off items that you consider expensive, that can be made more efficient, or those that are simply not needed anymore. All such items can be eliminated when the company requires.  Scale Down Variable Costs Desperate times call for desperate measures. During low sale periods or a global recession, you must scale down on variable costs that are acceptable and even preferred in normal business operations. Once you’ve reviewed your costs, you can cut down on some unneeded liabilities and temporarily stop a few services. This step might require a change of strategy or even a different mode of work for employees but would greatly benefit in saving the company’s revenue in hard times.  2. Automate Automate Payments Suppose you keep forgetting the bill payment due dates and always end up paying fine charges. This might seem like a small amount but when added every month costs you a great deal which could easily be avoided by timely payments. Metric helps you optimize your cash flow by paying invoices on their due date thus saving you from overdue bills.  Automate Administrative Tasks Automating generic tasks like invoicing, appointments, scheduling, client follow-ups and others of the sort through apps like Metric, takes so much off your plate. Companies hire separate employees for these functions which costs you an extra expense. Mostly, founders try to do it themselves with their already hectic schedules, this burns them out and greatly increases the risks of error.  3. Invest in an Accountant You’re laying off your visiting staff, and we’re suggesting a new hire! Regardless of how ridiculous it might sound to you now, you’ll thank us later. Tough times require accountancy support like never before. Taking the right decision, saving your revenue, and keeping your company afloat, all while dealing with a recession is not something you could manage alone. With all other things, you need the support of an accountant for cutting overhead costs and helping you with the layoff if needed.  Metric’s “Growing” plan offers you automated generic tasks along with professional accountant support. However, if you’re a small company and can no way invest in an accountant right now, then Metric’s free plan works best for you. It facilitates you through insights and cloud-based real-time financial dashboards that assist you in making the right move in your business.  4. Re-evaluate Office Space and Equipment Expenses  Cost-Effective Office Space A larger part of your revenue goes into office space rent. A great office location undoubtedly reduces turnover rates and absenteeism, both of which can be sources of great financial loss. However, if your company is going through hard times, it’s always a good idea to reevaluate your office size and location. If your operations and productivity don’t get affected by a different location or a smaller office, it’s time to move.  Rent not Buy Equipment For your operations, you might need a few pieces of equipment once a month or even less. For a small business, it’s not smart to invest in buying equipment that you would use this rarely. Reach out to suppliers renting those pieces of equipment, make a contract of monthly renting for a few days, and save your precious capital.  5. Smart Employee Management  Trim Excess Staff When your business was growing and spreading, you might have hired a larger workforce than you require. Employee wages are one of the highest contributing factors to your overhead cost. Low performers are a drain on the company but layoffs certainly do impact the morale and productivity of the employees left. Thus ideally, it’s always better to make smarter hiring choices and go for multi-skilled candidates that could be used in other roles when needed.  Invest to Reduce Turnover  The company invests a huge amount of capital, time and effort in recruiting and training a single employee. According to this report, Voluntary employee turnover costs U.S. businesses $1 trillion per year. Even if you have other important expenses, setting an amount to maintain a healthy work environment and incentives for staff to stay is a must. IN economic downturns or company’s hard times, you can go for cheap alternatives to have the team refreshed and entertained. It is always a good choice to involve your team in the

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Angel Investors vs. Venture Capitalists

When you start thinking about ways to fund your startup, you’ll start to hear lots of terms being thrown around. Two of the most common forms of startup fundraising include angel investors and venture capitalists. Both types of investment can be extremely crucial to achieve the capital requirement that your business needs. Hence, understanding and differentiating between both terms is important. Let’s take a look at both types of startup fundraising sources: Angel investors are individuals with high net worth that provide financial backing to small startups or new businesses. Simply put, they invest their own money into various businesses. Oftentimes, angel investors will give new startups capital from their own savings, in exchange for convertible debt or equity. Angel Investment Many angel investors enjoy investing in companies that are of interest to them; and they have enough money to invest.  Advantages Angel investment is a great source of funding for new businesses. This is because many angel investors are experienced business people who can provide a ton of useful insights to your business. Not only that, but they are usually willing to take bigger risks than a bank, and may even invest the money without expecting repayment if the startup fails. Disadvantages However, if you are seeking angel investment, you should have a clear idea of how much involvement the investors expect. In some cases, you may lose out on a certain level of control. In some other cases, the angel investor may act as a silent partner and leave you to operate the company. In any case, the conditions should be listed in the term sheet. Venture Capital Venture capitalists are individuals who invest capital into a company, usually a startup or small business, in exchange for equity in the company. Venture capital is a good method of fundraising for new businesses that may be relatively high-risk, and that wish to scale up quickly. Advantages The biggest advantage of a venture capital firm is that your startup can expect to receive a large sum of money. Not only that, but there is no risk of having to pay the venture capitalists back if the startup fails.  Most venture capitalists also bring tons of business knowledge and are well-connected with other businesses, investors, and professionals that can help your business succeed. Disadvantages On the other hand, venture capitalists often offer their investments in exchange for equity. This means you will be losing out on complete control of your firm. At the same time, since most venture capitalists expect returns that match their investment, you will eventually need to take your business public in order to scale it to the expected level. If you plan on keeping 100% control of your startup and maintaining ownership forever, then venture capital may not be the best route for you.

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The 10 most Important Ecommerce Metrics to Track

As ecommerce becomes our livelihood the need for metrics, defined as quantifiable, consistent measurement of financial and website performance, becomes vital. Here we have listed the 10 most important ones: 1. Product Discovery Metrics   Metrics that help measure activities leading to creating brand discovery and awareness are:   Impressions; is the number of times an ad is presented to web users through Facebook, google, Instagram or social media.  Reach; the number of subscribers, followers and viewers your web content or ad fetches including email opt in subscribers, Facebook followers and loyalty program subscribers.   Engagement; measures how many subscribers (Reach) engage with your content (Impressions) 2. Acquisition Metrics These measure how many customers get to the website to view or purchase. Email Click Through; measures the number of email subscribers clicking on the website. Better worded email, strong calls-to-action and good subject lines promote Email Click through! Cost Per Acquisition; the cost associated with acquiring customers to your ecommerce platform.  Online businesses invest in paid search campaigns to drive website traffic and this ensures you keep within budget. Organic Acquisition Traffic; Measures the number of people attracted without any cost to your business. Ensuring a good Onsite/Technical SEO improves organic traffic. 3. Conversion Metrics The effectiveness in converting an online visitor to a purchasing customer are summed up as Conversion Metrics. These include Shopping Cart Abandonment Rate, Checkout Abandonment Rate and Sales Conversion Rates. 4. Average Order Value The Average Order Value (AOV) is the average price Ecommerce customers pay for items in their cart at checkout helping Ecommerce to improve marketing strategies.  5. Retention Metrics These provide data on customer loyalty and includes the following: Customer Retention Rate (CRR); The percentage of customers maintained over a period of time. Customer lifetime Value (CLV); Total earnings from customers during the length of business relationship. It is calculated from AOV, repeat transactions and retention period.  Repeat Customer Rate (RCR); It is the percentage of returning customers  6. Refund and Return Rate The refund and Return Rates are indicators of e-commerce health. 7. Ecommerce Churn Rate This measures the number of customers a business has lost over a period of time and improves strategies to retain customers for longer periods of time.   8. Net Promoter Score (NPS) It is the number of customers satisfied with your e-commerce business and willing to promote your business to others. The more NPS score the better your business is doing! 9. Subscription Rate This is the percentage of customers subscribing to email listings. 10. Program Participation Rate The percentage of customers enrolled in incentives such as loyalty programs or review platforms. Monitoring digital usage is an important aspect in business marketing. Not only that, but it helps you get clearer financial information about your business. 

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