It’s a small business owner’s fear: making bad money decisions as soon as you start your business or turn a profit, losing assets, and ultimately going under. So how do you know where to effectively spend your money, where to cut costs, and how to budget? In other words, how do you know if you are making mistakes with your business’ money? Below are 5 common mistakes you can make early on with your small business’ money and how to fix them.
- Spending money on unnecessary décor.
Everyone loves to have nice things, but nice couches, computer desks, chairs, pictures, water features and plants all add up. Be simple, and design with a scalable mindset. Depending on your business, provide the necessities to operate and eliminate the over the top showroom look for now. Keep your space simple and functional, not flashy.
- Paying high advertising costs.
Save the funds you might otherwise spend on a newspaper, magazine or TV advertisement and instead set up social media profiles and a website with a clear message and call to action. With a strong social media presence and encouraging word of mouth, you can do a lot of advertising in-house without having to spend a lot of money. Grow through networking at trade shows and chamber events. Need additional tips on knowing how to invest in marketing with your limited dollars? We have some more tips on how to produce big results with your small marketing budget.
- Forgetting to negotiate.
Negotiations are vital in business. Always search for the best deal, best quality and an overall good product. Look into at least 3 options before spending your cash, and be your own advocate, just like you would if you were searching for services as a consumer. The business world has a multitude of connections for you to take full advantage of. Don’t forget you can increase your odds of a good deal by partnering with and maintaining a good relationship with your vendors.
- “Giving away the farm.”
A big misconception is that you need to offer up a deal to get clients. Promotions, coupons or free services often don’t lead to repeat customers. They lead to one timers looking for a bargain. Be cognizant of your offerings to get business. If you discount too steep you may lose money, and you want to focus on attracting clients who are in it for the long term.
- Expanding too quickly.
Expansion is positive, but you need to plan for added costs, regardless if you are online-based or running out of a brick and mortar store. Grow your local base and cash reserves for a year before taking on any more expenses. When it is time to expand, test the waters and start slow. For new brick and mortar locations, ensure the distance is within a days’ time back and forth from your home base. If you are online, ensure that your website and inventory can hold up to the new traffic in your new target market.
The underlying rule is that keeping a budget and sticking to a plan will keep money from going out the back door. When you think of the money you bring in don’t forget about the potential costly mistakes you may be making with your money along the way too!
If you need help tracking your spending, get a Business Budget resource to help you track and analyze your spending. Share with us your thoughts on what ways you have found to not make the same spending mistakes.