Keeping your overhead low–and your profit margin high
Some people get baby fever; I, occasionally, get office fever. A dear friend recently leased a 5,000-square-foot space, one floor of a multi-story building. As he was giving me a tour, my eyes bulged with excitement as I thought about all of the wonderful things that I would do if it were my space. I envisioned where our (non-existent) receptionist would sit, where we would encase all of our clients’ books, and where I would set up working spaces for our freelance writers and editors.
And then, almost on cue, he told me about his monthly rent. I went from thoughts of marigold walls and laptop portals to financial fatigue. It was a reality check—a reality check that I needed about how much overhead can impact one’s bottom line.
Workspaces of the future
Although there is prestige that comes with having a brick-and-mortar space, and some businesses require it, it is not necessary for many of us. When you factor in rent/mortgage, additional insurance, monthly utilities, wi-fi, parking, and other fees, having a traditional office can get to be very expensive.
For those reasons, many of us opt to go the less traditional, yet the increasingly more popular routes of co-working or remote work. A friend and Freelancer’s Union member, Robert McGrath, will soon publish a book that takes a deep dive into co-working, What is Co-Working? I refer you to his book for a more nuanced discussion, but for now, here are some things to consider about keeping your overhead low:
Do you really need an office?
Because most of the work that I do is digital or virtual, it is rare that I have to physically meet with people. For those of us who find that we are in front of a computer more than we are sitting in front of a stationary desk, taking on the overhead of a designated office space is probably not worth it. Instead, places like Starbucks, coffee houses, public libraries, or even restaurants may be much cheaper, or free, alternatives.
Unfortunately, Starbucks was in the news for an incident of blatant racism that occurred at one of its Philly locations. After the incident, I thought about how, over the years, I have used Starbucks to meet clients and potential clients. The ambiance is great, the seating is comfortable, there is often convenient parking and free wi-fi. I am not a coffee drinker, so I make a point of buying a bottle of water. The $2.99 that I pay for the water pales in comparison to what I would pay to either lease or rent something similar.
The variables of the nomadic office
Conversely, the disadvantage of using places like a Starbucks, or an independently owned coffee shop, is that there are many variables that you cannot control, including the noise level, the physical capacity, and the level of privacy that you will be afforded. If these things are dealbreakers or interfere with your ability to perform your services, then you may need your own designated space. If so, consider a co-working facility or renting a singular office or desk as opposed to renting an entire office suite or an office building.
When seeking out spaces, be realistic about what you can afford. Look at your last year’s earnings and your projections for the current year and the next year. If anything changes in your forecast, will you still have enough money to cover your monthly expenses? Most traditional office spaces will make you sign a six-month to year-long lease. Because your personal credit history may be used during the application process, you definitely don’t want to take on more than you can afford.
This leads to the next question that I want you to consider. . .
Will a virtual presence be just as effective?
My first webinar was awkward. In my previous professional lives, I’d grown accustomed to sitting around a large conference table or in mid-sized auditoriums. I could literally see, feel, and touch my colleagues if I so desired.
So, shifting to virtual sessions took some getting used to. Initially, I had difficulty figuring out simple things like how to mute attendees or how to ensure that the volume was appropriate. I even had a meeting where someone was upside down.
Honestly, going from in-person meetings to shared screens and computer cameras may be an adjustment, but it is worth it, especially if you are trying to keep your overhead low. There are several platforms that you can use. I strongly advice that you research which one is the best fit for you. My favorite, because of ease of use, is Zoom.
For less than $20.00 a month, I can stay connected to my freelance contractors, most of whom do not live in my city. I can also meet with clients at times that are convenient for them—this is particularly advantageous if your clients live in different time zones. Most importantly, having the capacity to engage with clients virtually gives you an additional option for how you deliver your services. This may not work for all freelancers, but if it fits within the scope of your work, definitely give it a try!
The bottom line
If you really want to increase your cash flow and your profit margins, pay particular attention to where and how you are spending your money. Re-occurring costs tend to be the costliest because they add up over a sustained period of time.
To determine if an overhead cost is worth it, conduct a cost-benefit analysis. This can be as simple as stepping back and asking: Do I really need to do this? Your answer to this question can be the starting point for keeping your overhead low and your profit margins higher.