Where To Save Money In Your Business
As experts in taxes and all the accompanying “stuff” that comes from having to talk to people about the intimate details of their spending habits the team and I see a ton of bad habits in a lot of places. It’s ironic that so many small business owners understand the failure rates of small businesses, yet often don’t show the financial discipline to ensure their own success.
- Pay early and not with credit cards. Most everyone you do business with likely offers a discount for early payment (or cash) and if you are paying any bills with credit cards that have a rolling balance, you need to stop. Early payment can usually get you a 10% discount and the current average interest rate for business credit in the U.S. is a whopping 15%, so one minor change in strategy could net you up to 25% savings. Get started now! With that in mind, we’re going to cover some places that entrepreneurs can save money each month – often quite a bit.
- Buy smarter – buy used. Sure, we know that there is some value to having prime office space in the right location, but time and again, we see business owners opting to spend thousands on décor – furniture, desks, and equipment – that could likely be purchased used for pennies on the dollar. After all, if the desk looks good, does it really matter if you bought it used? The same goes for printers and anything else you’d likely need in business. Yes, even vehicles. Do some research and see how you can save substantially on startup expenses.
- Outsource to experts. I’ve said this plenty of times, but having a team to protect your interests – attorney, tax pro, bookkeeper, and even, to a large degree, marketing – can save you the one commodity that many owners always run low on … time. Sure, the experts cost money, but the net effect of having a team that is highly trained and can help you when you need allows you to save money and time in the long run. Would you rather check legal precedents, tax codes, and digital strategies or run your business and make sales? I thought so.
- Consider going completely digital. Technology and computer networks have really negated the traditional office phone system as well as the need to market in the phone book. Take a hard look at any outdated technology, legacy software, and ineffective marketing that you might still be paying for each month. We can help you with an analysis of these expenses and advise you on what to cut.
- Don’t Barter. As a small business owner, it’s often very easy to devalue your time and agree to barter your services for another’s. If you do that, you need to arrive at a cash value for the transaction and then track time at your standard hourly rate. For example, if Joe is going to fix your car for some social media advertising, then you need to know what Joe would normally charge for the work. If it was $500, then you have to decide how many hours you would be willing to work to get your car fixed. Many business owners don’t give themselves enough credit for the caliber of work they do. As an owner, your time is more valuable than your employees, so while Joe may not value his time, you better value yours. If you MUST barter, exchange invoices on the work.
These are just some of the ways that we consistently see small business losing money. There are plenty of others – the $5 cup of coffee, too many (and too expensive) lunches every week, and even paying for too much software that you don’t know how to use. Next, we’ll look at places to actually spend money that can help you be better in business each month.
OK, So Where should you spend money?
Just as important as knowing where to save money in your business, it’s also important to know exactly where to apply money to generate leverage.
I know, I know, in all my years, I’ve never seen a small business owner that had trouble spending money, but there are a few places that, even as an expert in tax and finance, I think businesses should focus expenditures in.
- Outsourcing. One of the biggest trends in the economy right now is freelancing. From Uber to Fiverr, there are millions of people who are willing to do small (and big) jobs in your business, and a lot of them can bring real value to you. Instead of hiring in-house help to, say, handle traditional receptionist roles, consider a Virtual Assistant that can be trained to handle everything from email to invoicing. The best part? Many of these “digital” roles can be had for far less than minimum wage, even in the U. S., and you can eliminate the need for worker’s comp, benefits, and payroll. A good 1099 contractor can be a far wiser expenditure of money than a “real” employee and handle the same workload.
- Marketing. Trying to do it yourself and stay on top of marketing trends in your industry is impossible, period. Between the wide variety of ways to reach your audience, the demographics of that group, and where they can actually be reached, marketing has become far more complicated than it was even 10 years ago. Knowing how to find your core group and get them to pull out their credit card is a skill that frankly, most of us just don’t have and we see too many owners trying to be marketers when they could spend a little each month for expert help and have a tremendous return. Don’t be an expert at marketing unless your business is marketing – be the acknowledged expert in your field of endeavor and let a marketing “ninja” drive customers to you.
- You get what you pay for. There is a lot of free stuff out there. From website builders to accounting software, and while some of it is very good, a lot of it is a waste of your time Remember, it is free for a reason – it was a poor design, there are limitations to its use, or the company is looking to “upsell” you on to a better platform from the very beginning. Spending a day putting up a free website that looks terrible and cannot convert any visitors into buyers is a day wasted. Spend your time on finding the experts to give you the edge – in marketing, tax law, or business structure – will give you a more efficient and effective business that can create a better customer experience.
- Buy things once. Along the same lines as our other ideas, it’s a good idea to spend in areas that are going to give you a solid ROI. You may be able to adapt another company’s order form or software, but chances are, “one size fits all” will leave you having to force-fit your business into another’s structure and that will make it hard to scale. By having forms and processes that are designed especially for your business, you’ll be able to be far more efficient and save time every day – and that adds up fast.
It’s easy to shrink back a bit as an owner and entrepreneur when it comes time to spend some money, but what is critical is to think how that expense can help you to be more efficient in the long run. If your current system(s) take you 50 hours a week to return, say, $250,000/year and you are able to “tweak” those systems and processes to allow you to do the same sales in 30 hours per week, then that represents a huge increase in efficiency (and a raise!) for you and your business. Never be afraid to spend money wisely and if you ever struggle to understand how certain actions create certain results, by all means, come in and let’s have a conversation about the overall implications and returns on those actions.
Contact us today at 407-287-6638 to schedule a complimentary analysis of your cash flow to identify money saving opportunities.