By: Jennifer Brazer
Jennifer is the author of From Cubicle to Cloud and Founder/CEO of Complete Controller, a pioneering financial services firm that helps entrepreneurs break free of traditional constraints and scale their businesses to new heights.
Fact Checked By: Brittany McMillen
5 Powerful Strategies for Reducing Overhead Expenses Effectively
Have you ever looked at your monthly financials and thought, “Where is all this money going?” You’re not alone. I’ve worked with businesses that were thriving in sales but still bleeding cash—because their overhead expenses were out of control. These costs don’t generate revenue directly, yet they quietly erode your bottom line if left unchecked. In this guide, I’ll share five practical strategies to reduce your overhead without compromising core operations.
Understanding Overhead Expenses
Let’s start with the basics: what are overhead expenses really?
Overhead expenses are the ongoing costs required to run your business—but they don’t directly contribute to making a product or delivering a service. Think of things like:
- Office rent and utilities
- Employee salaries (especially admin)
- Insurance premiums
- Non-billable software tools
According to the 2025 Report on Employer Firms, more than half of small businesses (56%) cited paying operating expenses as one of their biggest challenges[1]. Understanding the definition of business overhead and indirect costs is the first step toward managing them effectively.
These can be grouped into three types:
- 🧱 Fixed: predictable and consistent (e.g., rent)
- 🔄 Variable: fluctuate with activity (e.g., shipping costs)
- ⚖️ Semi-variable: a mix (e.g., utilities that have a base rate and scale with usage)
Industry also plays a role in your overhead structure. Research from Paycor shows that industries like healthcare, IT consulting, and software publishing typically have the highest labor costs in the U.S.[2]. An acceptable average labor cost percentage hovers between 25-35% of gross sales, though this varies by industry and location[2].
Getting clear on the type of expense helps you decide what can be optimized, cut, or renegotiated. Want to maximize profit margins? Start here—by labeling and sorting every indirect cost you incur.
Assessing Your Overhead Costs
You can’t fix what you don’t understand.
That’s why your first step is a full-blown overhead cost analysis. I’ve walked companies through this process dozens of times, and here’s how you can do it too:
- Export your expense reports from the last 6–12 months.
- Categorize each cost as fixed, variable, or semi-variable.
- Highlight any expense that hasn’t delivered clear ROI—or hasn’t been reviewed recently.
- Look for duplication: Is your team using two project management tools? Paying for overlapping subscriptions?
In my experience, most businesses have common expense categories they should track. These typically include workspace and utilities, payroll and benefits, professional services, equipment and supplies, software subscriptions, and marketing costs[3]. Following small-business expense management guidelines can help simplify this process.
Then it’s time to act:
- Cancel or downgrade underutilized services.
- Renegotiate contracts with software providers or vendors.
- Reassess employee roles—some positions may benefit from part-time or outsourced replacements.
The clearer your records, the easier it gets to spot savings just waiting to be discovered.
Reducing Overhead Costs with Technology
Back in the day, I once worked with a team juggling three spreadsheets just to track inventory. It was slow, error-prone, and maddening.
Then we switched to a cloud-based system. Inventory was updated in real time, mistakes dropped, and people got back hours per week.
That’s the power of technology in managing operating expenses. We were able to streamline operating expenses in ways we hadn’t thought possible before.
Recent data shows that operating expenses for US investment-grade companies jumped by over $73 billion in the third quarter of 2024[4]. With costs rising, automation becomes even more critical.
Here’s where you can apply technology:
- 🤖 Automate payroll and invoicing processes
- ☁️ Move inventory management or bookkeeping to cloud platforms
- 📆 Use project management tools to reduce miscommunication and resource waste
American wages are at an all-time high, outpacing inflation in many sectors[2]. Nearly half (47%) of businesses reported lower salary budgets for 2024 compared to the previous year[2]. Technology can help balance these rising labor costs by reducing the hours needed for manual tasks.
By reducing human error and time spent on routine tasks, you’re not only saving money—you’re also boosting efficiency.
Tech doesn’t just cut costs—it sharpens your systems.
Strategic Renegotiation and Outsourcing
Not everything needs to be in-house.
If you’re still maintaining an in-house IT staff, accounting department, or HR rep—ask yourself: “Is this the best use of our resources?”
In my 20+ years at Complete Controller, I’ve seen countless businesses transform their finances through outsourcing non-core accounting functions. This approach can help you:
- Avoid long-term contracts and benefits payouts
- Pay only for the work you need, when you need it
- Access specialists with deep domain expertise
Also, take the opportunity to renegotiate existing contracts. Internet bills, vendor rates, janitorial services—they’re all negotiable.
💡 Tip: Renegotiation works better with data. Before making the call, gather benchmarks or competing rates so you walk in with options—not just opinions.
Leveraging Remote Work to Lower Expenses
One of the most impactful shifts in modern business? The move toward remote work.
And the overhead savings are real:
- 🚪 No need for massive office space = lower rent
- 💡 Drop in utility bills and office supply costs
- ☕ No more budget for breakroom snacks or parking passes
Take Vistaprint, for example. When they went remote, they saved on real estate, equipment, and maintenance—while maintaining team productivity. In fact, their employee satisfaction went up. Studies confirm that remote work can significantly reduce operating expenses while maintaining or even improving productivity.
If your operations can run flexibly, this is worth deep exploration. Even hybrid setups can bring noticeable reductions in business overhead.
Creating a Sustainable Expense Management Plan
Cutting costs isn’t a one-time project—it’s a cycle.
That’s why you need an expense management plan baked into your business model. I’ve learned that sustainable approaches prevent the “slash and burn” pattern that often leads to bigger problems down the road.
Here’s how to build a sustainable plan:
- 📊 Run quarterly overhead reviews
- 📅 Forecast expenses alongside revenue projections
- 📉 Set reduction targets tied to department-level KPIs
- 🧾 Use tools like FreshBooks or QuickBooks for ongoing expense tracking
Implementing ongoing expense management strategies keeps your business financially resilient in changing markets.
And always involve your team. Often, employees have front-line insight into where money is being wasted—even if leadership can’t yet see it.
When done right, sustainable expense management protects your profit margins and keeps you agile for whatever comes next.
Real-World Case Study: Embracing Remote Work
Vistaprint embraced remote work in a big way—switching to a flexible model that allowed employees to collaborate from home. The result? They downsized physical offices, cut utility and maintenance costs, and increased employee satisfaction and retention. All without compromising performance.
This single decision drastically lowered their overhead expenses and set them up for long-term savings and adaptability. What’s particularly interesting is that they found collaboration actually improved in some departments, contrary to what they had expected.
Conclusion
Here’s the bottom line: Reducing overhead expenses doesn’t mean slashing quality or shrinking your team. Done right, it’s about working smarter—leveraging technology, negotiating with confidence, outsourcing where it makes sense, and adapting to modern workplace norms.
When every dollar is accounted for and optimized, your business becomes leaner, stronger, and more resilient.
Ready to take control of your overhead? Visit Complete Controller for expert tools, tailored strategies, and financial insights that help you stay out of the red—and ahead of the game.
FAQ
What are examples of fixed overhead expenses?
Fixed expenses include rent, permanent employee salaries, and insurance payments that stay consistent monthly. These costs remain the same regardless of your business activity level, making them predictable but also requiring careful planning to ensure they don’t exceed your revenue capacity.
How does technology help reduce overhead costs?
Technology reduces overhead by automating repetitive tasks, minimizing human error, and decreasing the need for physical storage space. Cloud-based systems can replace expensive on-premises solutions, while digital communication tools can lower travel expenses and office space requirements.
What are the benefits of outsourcing non-core functions?
Outsourcing non-core functions reduces fixed payroll costs, eliminates benefit expenses, provides access to specialized expertise, increases scalability, and allows you to pay only for the services you actually use. This creates more financial flexibility for your business during both growth periods and downturns.
How can remote work impact overhead expenses?
Remote work dramatically reduces office-related expenses like rent, utilities, maintenance, office supplies, parking, and food service costs. Businesses can downsize physical space or eliminate it entirely, potentially saving 15-25% of their overhead budget while also reducing employee commuting costs.
Why is regular overhead cost analysis important?
Regular overhead cost analysis prevents cost creep, identifies inefficiencies, helps prioritize spending, reveals opportunities for automation, and enables better budget forecasting. Without regular reviews, unnecessary expenses can gradually accumulate and significantly reduce profit margins over time.
Sources
- Federal Small Business Administration. (March 27, 2025). 2025 Report on Employer Firms. https://www.fedsmallbusiness.org/reports/survey/2025/2025-report-on-employer-firms
- Paycor. (December 18, 2024). The Biggest Cost of Doing Business: A Closer Look at Labor Costs. https://www.paycor.com/resource-center/articles/closer-look-at-labor-costs/
- Archer Lewis. (January 3, 2025). 16 Common Small Business Expenses in 2025. https://archerlewis.com/blog/common-small-business-expenses
- S&P Global Market Intelligence. (December 18, 2024). Operating Expenses Grow by Over $73B for US Investment-Grade Companies in Q3. https://www.spglobal.com/market-intelligence/en/news-insights/articles/2024/12/operating-expenses-grow-by-over-73b-for-us-investment-grade-companies-in-q3-86778625
- Complete Controller. From Spreadsheets to CRMs. https://www.completecontroller.com/from-spreadsheets-to-crms/
- Complete Controller. Accounting Outsourcing Economics. https://www.completecontroller.com/accounting-outsourcing-economics/
- Complete Controller. Efficient Business Finance Management. https://www.completecontroller.com/efficient-business-finance-management/
- Investopedia. Overhead Definition. https://www.investopedia.com/terms/o/overhead.asp
- Stanford Institute for Economic Policy Research. How Working from Home Works Out. https://siepr.stanford.edu/publications/policy-brief/how-working-home-works-out
- Small Business Administration. 5 Ways to Cut Costs in Your Small Business. https://www.sba.gov/blog/5-ways-cut-costs-your-small-business
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