Over 50% of new businesses fail within the first five years of existence. This is an astonishing statistic. How can this be true? Some may attribute it to poor planning, bad decision making, or lack of funding. While these all may be contributing factors, in many cases, excessive overhead costs are especially damaging. In this article, we’re going to look at how it’s possible to start a successful business with zero overhead. (I know because I’ve done it.)
What is Overhead?
I don’t want to get into a boring accounting discussion. However, we need to understand the basics of overhead before we can know how to avoid it. In a nutshell, overhead is any cost that doesn’t directly relate to the production of an item or delivery of a service. Here’s how Entrepreneur.com defines overhead:
Overhead refers to all non-labor expenses required to operate your business. These expenses are either fixed or variable.
Having worked for other start-ups in my career, I can attest that overhead can be a deal breaker. Rent, marketing, salaries, utilities, and technology are just a few of the necessary evils. When I started Keener Marketing Solutions, my goal was to be as “overhead-free” as possible. By minimizing overhead, I’m able to reduce my risk. In turn, a reduction of risk translates into a more viable business. Here’s how I did it….
The Overhead-Free Business Model
As I mentioned, there are a few overhead categories that most businesses can’t avoid: rent, marketing, salaries, utilities, and technology.
Below are a few ways I keep my overhead as close to zero as possible. I hope you find them helpful.
- Rent – I work from home. I’m already paying my mortgage each month. Check that one off the list.
- Marketing – First off, ask yourself this: “What am I really marketing?”. As I mentioned in a previous article, there is no better tool for consultants to market themselves than Upwork (formerly known as “oDesk”). Here are a few of my secret weapons:
- Upwork.com: the world’s largest virtual employment marketplace (Free)
- LinkedIn: the world’s largest professional social network (Free)
- MailChimp: the best email marketing software (Free)
- WordPress: the best website content management system (Free download)
- Google Analytics: find out who’s looking at your website and how they found you (Free)
- Salaries – I don’t pay salaries. I pay contractors on an hourly or project basis, based on what I need. Less risk for me and more upside for the contractors.
- Utilities – Much like the “rent” overhead category, you’re likely already paying for your home or apartment’s Internet, water, gas, and electric. The big exception here is your phone. More and more people are dropping landlines these days. Here are some creative ways to keep phone overhead down:
- Skype: the most reputable voice-over-ip system, offering free calls to other Skype members (Free)
- Google Voice: a neat service from Google that allows you to make free calls in the US (for now at least) and also set up call forwarding, etc (Free)
- Boost Mobile: pre-paid unlimited smartphone access (monthly unlimited plans start at around $50 with no contracts to sign)
- Technology – I could go on for hours about this category. If you have a need, chances are there is a free or almost-free Saas (software-as-a-service) that can be found with a simple Google search. Here are a few I use every day:
- Google Drive (formerly Google Docs): an online document archive and collaboration system that rocks
- Google Apps Email Hosting: affordable email hosting for custom web domains
- FreedCamp: like Basecamp, but free!
- QuickBooks Simple Start: this used to be free, but now it’s a few dollars per month (for an in-depth analysis, check out this comparison article from our friends at FitSmallBusiness.com).
Proper Planning is the Secret to Success
If you put some thought into your business plan, you can often find free or low-cost solutions that keep overhead to a minimum (or preferably zero). It is important to stay mindful of your business needs and identify solutions that are a good fit.
Feel free to share your secrets for keeping overhead to a minimum. I’d love to hear them.