Running a small business is never easy. With customers, vendors and employees assailing you from every side, you may feel like a weary parent trying to rein in teenage spending even as your wallet continues to thin. Only you can determine what expenses are essential for your business, but some common capital-depleters stalk every entrepreneur.
6 Small Business Money Wasters:
Ineffective Advertising And MarketingNo one uses yellow pages or toll-free numbers. Direct marketing mail often goes straight in the recycle bin. Smartphone users block unrecognized callers. Emails land in the spam folder or receive a quick "Unsubscribe." Even social media costs escalate rapidly with little return. Billboards, branding, magazines and circular ads can wipe a budget clean with no return on investment. The 20-80 rule reigns. The majority of business comes from a minority of paying customers. Spend money to reach only your targeted market, and keep customer-acquisition costs low. Placing business card displays at local veterinary hospitals or training centers connects you directly with a paying customer base for your professional pet-sitting business. In contrast, a one-time $50 newspaper ad may result only in time-consuming curiosity calls. The best advertising is word of mouth – effective, valuable beyond price and free.
Too Much Too Soon Of EverythingYou've dreamed of a spacious brick-and-mortar storefront in a prime location with stylish furniture, gorgeous displays and shiny new equipment with full warranty. You fantasize about edgy, fully interactive websites with stylized pages and an automated inventory-invoice-ordering-accounting system. Wallet-aches, however, are made of un-budgeted rent and utility expenses, unoccupied space, unused equipment, unvisited websites and unsold inventories. Think of your business as a child that must eat. Does it really need caviar right now? No one will know whether you have a $2,500 brand-spanking-new commercial mixer or a $600 used workhorse. Buy only what you need to complete confirmed jobs. You can always expand or buy up later.
Employing An EntourageSome contracted service costs are unavoidable, such as legal or licensing fees. Many others, however, are purely choice. While customers may take their sweet time finding you, vendors looking to sell you goods or services will be speedy-quick and promise the world. Hiring a bookkeeper, cleaning service or maintenance person may be a luxury you simply can't afford. When possible, DIY – do it yourself. Many successful entrepreneurs who didn't know how to do something learned and used that knowledge well after they could afford to hire someone else to do it. Learning the ins and outs of your business ensures that when you do hire someone, you'll remain in control of your business and its purse strings.
Time And TravelEfficiency experts wrestle with ways of valuing time, but networking, travel and social events can consume time and resources, with no direct value added. However, connecting with potential customers is key to growing your business. Every industry holds conferences and seminars, often meet-and-greet events filled with vendors hoping to meet clients, not necessarily become one. Many of these events can be a hit-or-miss gamble that might not bring about real results. If you're going to spend money on long-distance travel, choose tried-and-proven trade shows where you can meet customers, wholesalers or retailers who will directly benefit your business, and be ready to deal. Depending on your services or goods, even local travel beyond a certain point may end up costing money rather than earning it. Try to establish whether potential clients or business associates are serious in their inquiries or are simply fishing to lowball you or use your inexperience to make a better deal with someone else. If time (or a business relationship) is on the table, money is, too.
Poor EmployeesHappy customers are likely to become regular customers, but one bad experience can send even your most loyal supporter into the community or online to share the horrible tale. Employees who are lazy or careless, steal, or behave disrespectfully toward you or your customers will cost far more than wages. Choose the people you really need, and keep them by paying them what they're worth. If you'd have to pay them poorly full-time, then pay them well part-time; they might actually prefer being able to accomplish as much in 3 or 4 hours as others do over an entire day. Let them know that as your business grows, their paycheck will also. In the meantime, don't fear to fire non-performers. You can't afford to keep them working against you.
NegligiblesBudgets are everything. Nevertheless, little expenses (and big ones) pop up. Sometimes, they're necessities, but many times they're simply temptations. Going with color business cards, opting for a more expensive laptop or purchasing annual memberships to save later may seem insignificant, but even elephants can be eaten one bite at a time. Choosing a complex color logo can result in increased costs on stationary, signage and even uniforms. A more expensive laptop might need an equally expensive warranty. As for the annual memberships, unless you have enough clientele to merit repeated use of a service, it may cost more than it saves.
Salesmen pad their commissions with add-ons, and retailers have made low-ticket impulse buys at the check-out a store staple worth billions of dollars. Put that $50 you save by passing on an unneeded service or frivolous product upgrade toward essentials that will provide measurable return on your investment.
Small Business, Small Budget
Huge chains have the financial capital and corporate loan structures to open top-of-the-line, fully serviced and staffed stores in prime locations, but most entrepreneurs have to start small and work toward growth. Counting pennies closely may require persistence and discipline, and it may get old sometimes, but eventually – if you invest wisely – you'll be counting dollars instead.
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