One of the more persistent sentiments I’ve personally seen more openly laid out over the past few years of this recession is one which claims ‘there’s too much overhead at my firm’. Most often, this statement is being made by someone who is presumably not part of that ‘overhead’ and expresses a frustration that a disproportionate level of senior staff are in a firm, relative to everyone else. The effects of this can lead to lower salaries, less chance for advancement etc. It’s a perfectly understandable sentiment.
What’s struck me about that sentiment, though, is how the term ‘overhead’ can be misunderstood and misapplied. “Overhead” for the purposes of a services firm, are all of the expenses that it takes to run the business apart from direct salaries and the associated taxes/benefits. It’s the fixed costs that aren’t directly tied to your employee costs. So, in practice, it’s your rent, utilities, supplies, office lunches and coffee. It includes all your insurances …
