No matter how much your company makes, you can’t grow if you fritter away your revenue. Small businesses, especially startups running lean, must make the most of every dollar.
Businesses don’t waste money the same way consumers do. While irresponsible consumers might eat out every night or drain their savings accounts, companies lose cash in a less obvious way — namely, by spending money on services they don’t realize they don’t need.
When investments don’t contribute to growth, business owners may as well set their money on fire. By analyzing your finances and adjusting your priorities, you can eliminate small wastes in your budget and use that money to boost your growth.
Optimize Your Small Business Budget
You can’t plug financial leaks if you don’t know where your money goes. Research from Clutch discovered a staggering 61% of small businesses did not create official budgets in 2018.
If you don’t have a formal plan to track your spending, go create a budget for your small business now.
Keep in mind that your company cannot grow unless you learn to manage your cash and spend it wisely. Failing to earn enough counts as a cash flow problem, but so does spending too much. Richard Branson, a billionaire entrepreneur, sees staying on top of finances as crucial for success, admitting, “It ultimately became the reason why we had to sell Virgin Records — to free up cash to make Virgin Atlantic a success.”
Some headstrong entrepreneurs ignore their budgets because they believe everything will work out once they reach that next revenue threshold. In most cases, though, that threshold never arrives. Bad spending habits catch up, forcing the company to set new, higher revenue goals. If those business owners took the time to address their waste before they pursued aggressive growth, they could enjoy their successes instead of worrying about the bills.
How to Stop Wasting Money
Enough is enough. Follow these three tips to get more from your money and position your company for long-term growth:
1. Know when to Negotiate
You don’t have to pay list price for everything. As a business, you provide valuable income for your vendors, who will likely cut you deals or offer alternative service packages to keep your account — but first, you have to ask them.
Look for opportunities to negotiate on some of your biggest expenses. Credit card processing fees, for example, are not ironclad rules. While you can’t negotiate every portion of your fees, you can shop around for vendors with lower markups. Don’t let simplicity fool you — credit card processors want you to take the first offer so you pay more without realizing you have options.
Insurance companies, benefits providers, loan issuers, and leasing agencies all want your business, and if you push back, they may help you lower your payments. When it comes to negotiating, “preparation is essential, as many people do not plan what they are going to say,” notes Tara Swart, a neuroscientist and leadership coach. “Once planned, you must embody it completely.” Do your homework and have information about competitive rates and service offerings at hand when you call vendors to negotiate better deals.
2. Test Expenses to See How they Affect your Budget
If you only analyze your income and expenses at tax time, you’ll miss opportunities to adjust your budget on the fly. Use bookkeeping programs (or spreadsheets, if you don’t mind a little manual number work) to play with your budget and test potential changes.
What would happen if you negotiated your next lease term down 5% and increased spending in your best marketing channel using the savings? Does the money you saved leave you enough cash to test some new ideas? Or are there looming expenses you’re not taking into account? Instead of investing real money and hoping for the best, test out concepts on screen — getting a 360-degree view of your financial situation — before opening your wallet.
When evaluating where to reallocate spending, separate expenses into essentials, nonessentials, and luxuries. Negotiate essentials if you can, but recognize that you can’t quit paying them. Evaluate nonessentials and luxury spending on an individual basis.
3. Audit your Bundled Services
Most companies pay extra for services that they can already access through other vendor offerings they use. If you already got HBO through Hulu, for example, you wouldn’t go paying an extra $15 per month for a separate subscription. The same concept applies in your business.
Check your bundled services to see whether there are redundancies that can be cut. Robin Hau, CEO of cloud services company SimplyClouds says, “Cloud-based suites of products often have some interconnectivity or dependency that justifies selling them together for a higher price — even though users might not want or need everything that’s included.” There’s no need to pay twice for common services like email, group chat, file storage, etc. Consider whether breaking up your bundled services could save you money by giving you only what you really want.
By following these tips, you will have more money to spend on growing your business. Don’t throw that new cash away — take your time to research your options and invest wisely. Do it right, and you will spend less, save more, and create a better future for your business.
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This article, "Wasting Money in Your Business? Here’s How to Stop" was first published on Small Business Trends
Originally posted on Wasting Money in Your Business? Here’s How to Stop via Small Business and Franchises
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