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Every business incurs expenditures beyond the core costs of acquiring goods, raw materials, manufacturing and the other activities comprising the actual trade of the enterprise. Many of these additional costs are administrative, such as book-keeping, accountancy, office expenses etc. These are necessary to a greater or lesser degree, but never income-producing in their own right. Such a business expense is generally referred to as an 'Overhead'.
While most entrepreneurs accept the need for some overheads, thrifty operators do try to minimise them. In my early days in business that was my approach. Even so, the administrative outgoings irked me. That certain activities did not contribute directly to the income and profitability of my operations, contradicted the 'dynamic enterprise with everybody producing' ethos on which all my business is based. Then I came up with a solution to my quandry. I turned overhead into opportunity!
I decreed that every part of my business should be a profit centre in its own right. To achieve this involved selling the internal services on the wider market. As the abilities, knowledge, experience and infrastructure of the respective disciplines already existed, promoting the various services was relatively easy. In a short time, and despite the cynicism of some, every department was 'earning its own corn'. Not only that, they were generating profit. Here are just a few of the 'new businesses' I created :
Accountancy and Book-keeping
IT and Marketing
Pensions and Investments
Sales and Sales Training
In addition to these, I rented out office space which more than covered the expense of my own accommodation; I founded a telecommunications business through sourcing solutions for my core business; I set up and developed an office-cleaning and building maintenance company based on my own initial in-house needs; I established a legal, documentation and contracts practice from my own experience. A personal consultancy service catered for non-business and family requirements of clients and a tour company attended to their leisure time pursuits.
In short, I turned my in-house services not just into independent profit centres, but into a chain of profitable enterprises and one centralised administration. With everything under one roof, these businesses 'fed' each other. Clients passed seamlessly from one to the other as their needs dictated.
When you incur a business overhead, do you see an unwelcome expenditure or do you see something more? Overhead or opportunity? - that's the question. Your answer may well determine the kind of business future you can look forward to.
I am Tom Riach. I live and write in the sunny south of Portugal.
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OVERHEAD OR OPPORTUNITY? is an original copyright Tom Riach feature.
I hope you enjoyed this presentation and found it to be of value.
To learn more please visit me on my Author Page.
See you there! Regards, Tom.