Things change and what was good can become bad, overheads are one of those things, let’s see why overheads are bad.
Many years ago I was working with some small retailers who wanted to be based in Stratford-Upon-Avon. In those days Stratford was a major tourist and retail centre and leases on shops (even short ones) were not only expensive but commanded a premium. Up front charges were many thousands and in some cases tens of thousands of pounds and the longer the lease the greater the premium, with twenty five years leases being fought over for huge money.
Today in Stratford it’s difficult to give away a lease and long leases are almost unheard of. Many landlords are having to offer rent free periods and other incentives to try to get their shops occupied. The overhead of a lease has gone from being an asset to a liability. The world of retail has changed in so many ways.
In our modern world things change fast. Equipment that would have been usable for many years is overtaken by new processes or products. Services that require ranks of people in offices can be done by AI is a fraction of the time or are just no longer necessary.
Predicting which overheads will become liabilities and drag the business down is difficult or even impossible and so keeping overheads as low as possible enables us to react quickly to changes and capitalise on new techniques. It takes months or even years to reduce many overheads and so the trick is not to acquire them in the first place. Things such as short term rental agreements for space and for equipment (and even people) look expensive but the premium for flexibility may well be worth paying.
To be effective you need to be flexible. To be flexible you need to keep the overheads low.
If you want to look at this further we have both manufacturing and service simulations to enable everyone to be more effective then please contact us for details – https://www.wellsassoc.co.uk/contact/
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