To the blog for small and medium sized business (SME) owners.

Tuesday, January 22, 2008

Overhead Cost Reduction

The control of business overhead is critical to the ongoing success of any organization.

The ability to pass on increased costs in higher selling prices may be resisted by the customer and competitors may move to acquire your market share. Indeed customers may seek price reductions and the challenge for the business will be to offset any selling price reductions against savings derived from improved efficiency savings.

Understand your cost base!

The interrelationship of costs should be appreciated. Costs are generally fixed or variable in nature and the ability to recognize the impact on the cost base of:
- Changes in volumes
- Implementation of improvement programmes
- Process changes
- Technological changes
- Product design changes
- Cost price increases
- Under utilized or redundant fixed assets
- Obsolete stocks
- Duplication, waste, errors
is critical.

The above factors will change the cost structure and understanding how, by how much and when will allow the business owner to control the business more effectively.

Learn more contact David Willetts, DAW Consulting

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