In most businesses the largest part of their expense base is Rent, Payroll, Advertising and Insurance. Focusing on managing these expenses will provide you with the biggest bang for the buck. Here is how to approach managing these expenses:



• Rent- Business owners think it is impossible to re-negotiate the rent because you have a lease, but the landlord does not want to lose a tenant, especially a commercial tenant where they would have to do another build out and/or deal with the cost of vacancy. Most landlords understand cash flow problems because many of them have experienced cash flow problems themselves through real estate downturns. What I found to be the best way to negotiate with the landlord is to show them your financial statements and show them what concessions you need in the short term based on the financial position of your business. 
• Payroll – Obviously, you want to keep your “A” players and lay off your middling employees. In retail, another strategy to cut payroll hours is to change the store opening and closing times so there is only one eight to nine-hour shift.
• Advertising – Generally, cutting advertising is a bad idea, but there are ways to cut advertising without making a dramatic impact on sales. If you have been tracking what works for you, then of course you will know what to cut by eliminating the advertising that is not working. You can also reduce sizes of ads, changing from 4 color to 2 color printing, developing more of a web presence using search engine optimization strategies or doing more 10 second cut-ins on the radio versus 60 second spots.
• Insurance – Start with health insurance. Get quotes from 4 health insurance providers. What I found is that although rates are basically the same, you will find one creative provider who will figure out a way to cut your Medical Insurance cost to the lowest possible amount.

Most business owners wait until profits are down before they assess the size of their overhead. Assessing the size of overhead should be an ongoing process no matter how good or how bad business is. The key to managing overhead is to review your P&L every single month and if an expense is higher than it was the previous year you need to find out why. Once you know why, you can take action and prevent future problems.