For every 10 businesses that are established, about seven go out of business after 18 months. This means entrepreneurs are borrowing and spending a lot of money to start something that will likely shut down in less than two years. It could be because of the product or service these business owners are offering, but it could also be due to their questionable expenses.
When starting out, the real entrepreneur understands you have to resist luxury. In other words, you should refrain from spending large sums of money before you make that first $1 profit. If you’re really business savvy then you will operate your company with a minimalist mindset. Just because you may have a small business loan it doesn’t mean you should be charging your account for brand new suits, computer equipment or expensive lattes.
A lot of startups go bust because they lack the expertise to balance the books and manage the money. Simply put: those who start a small business fall in love with the romantic idea of working for yourself, but fail to adequately run a small business. We watch too many movies and read no books, so it’s only natural we have a poor understanding of what it takes to own and operate a small business. If media actually covered behind the scenes we wouldn’t like it so much.
Here are 10 things a small business should avoid waste money on:
1. A Website Full of Bells & Whistles
In today’s marketplace, you need a website. There is no other way around it. It’s an alien concept if your small business does not have a place on the World Wide Web. It’s an essential aspect for your business.
With that being said, you do not need to pour thousands of dollars into your web portal. You do not need the various bells and whistles and elaborate designs to maintain a website. All you need is a simple format and design and regular maintenance, which you could accomplish on your own. It’s as rudimentary as this: put a couple of hundred dollars aside, open a WordPress account and do some research online. Finished. You just saved a lot of dough.
2. Hefty Banking Fees
For whatever reason, you are making these mistakes:
- Merging your personal bank account with your business.
- Using an ATM to access your capital.
- Falling into overdraft to pay for business-related items.
This is a ridiculous way to operate a business. What you need to do instead is to launch a business bank account, apply for a business credit card and avoid being trapped into an overdraft to cover your business expenses. Never use your personal bank account to pay for your business.
3. Fancy Coffee For the Team Everyday
Yes, you want to treat your team because they have been working extra hard, they have dedicated themselves 100 percent to your small business and you want to keep up morale. You think the best way to do this is to buy a fancy $5 to $10 latte every single day for your team of five. Wrong. You must refrain from doing this because it’s expensive and a waste. Indeed, it’s kind to treat your employees once in a while, but on a regular basis is ill advised.
4. Expensive Work Spaces, Premises
We all want a nice place to work. If we’re going to be spending most of our time there then it should be comfortable, pleasant and relaxing. However, you shouldn’t go overboard on the interior decorating or the furniture because it’s just a waste. If you eventually generate seven-figure revenues then perhaps you can start doing this. For now, your workstation in the corner of your apartment or a hole in the wall midtown for you and your employees, will suffice.
5. Top of the Line Software, Equipment
Just because you have a $10,000 line of credit or because you have a brand new office it doesn’t mean that you have to buy the top-of-the-line computer equipment and software. A simple Dell computer and a Microsoft Office program in addition to the plethora of free project management systems, content management systems and cloud storage facilities will be good enough for you.
6. Association Networking Fees
If we had a nickel for every time a small business owner decided to join a local association or a group network in order to increase their business, then we would be well off. Association and networking fees are ineffective and very exorbitant. They’re unnecessary and just take away from your cash flow.
7. That Bottled Water Sitting in the Fridge
Why the heck are you wasting money on bottled water for your small business? This is very expensive and wasteful. You don’t need to spend $50 a week on a case of bottled water. If you want to provide yourself and your team with good water then purchase a Brita filtering system or a water cooler. Done.
8. "Convenience" Fees That Are Expensive
The old adage is that time is money. Therefore, you believe that "convenience" fees are worth the extra cost. This is incorrect. It won’t save you much time and it definitely won’t save you money. Next time you order something for the office, avoid the convenience, technical and processing charges and go to the location to pick it up. Unless it’s office furniture, forget about the so-called convenience.
9. Intricate Advertising Schemes
It’s easy to fall into the trap of wanting your brand to be plastered all over the Internet. Do not cave in. Pervasive and intricate advertising schemes won’t get you very far, and will only hurt your small business in the long-term. Not only are most digital advertising schemes expensive, they also turn off potential customers. We are all inundated with ads, so ask yourself: how do you feel when you see banner ads, pop-ups and video ads for companies you don’t really care about? Exactly.
10. Promotional Flyers & Other Costly Print Marketing
It’s a question that must be asked: do promotional flyers even work? When you pass by a pole on the street and you see a dozen flyers do you ever pick up the little paper to rip off? Likely not. So those 5,000 promotional flyers you printed off that you’re going to place on people’s windshields and in apartment buildings will just be money thrown out the window or flushed down the toilet. Although print marketing is something that is now outside of the box kind of thinking, it can be mostly a waste of dollars..
Print is dead, long live digital!
Small businesses have to be very smart in the way they handle their finances. When it comes to receiving money or spending money, small business owners have to be very careful, particular and diplomatic in the way they allocate this precious commodity. A small business must be a lean and mean machine that doesn’t rely on spending $10,000 for a social media campaign. Rather than taking the social media route, put that $10,000 into your product or service.
If you’re a small business owner, what kind of things did you waste money on at first? Let us know in the comments section...