6 Common Small Business Money Leaks And How To Plug Them
What you're looking for, as a small business owner, are all the ways you can continue to grow your business and keep the quality high while cutting down on costs. Despite your best efforts to plug the gaps, you may be overlooking some money leaks — some obvious and some not-so-obvious.
Employee salaries are often one of the highest costs of running a small business, and the salaries your business pays out could be costing more than they should. The answer, however, is not to go firing people so you can reduce your expenses. Check for these types of employee-related money leaks instead:
- Having the right employee in the wrong position;
- Outsourcing tasks that could be handled by an hourly employee instead (at a lower cost to you);
- Not hiring enough people to get the work done;
- Micromanaging your employees rather than training them to do their jobs themselves.
Do you really need all the space you're paying for? Remember that space costs you more than the rent check; it also costs you in maintenance, repairs, cosmetic updating (new window displays, signage, etc.), and utilities. Use the space you're paying for, or quit paying for it, and save your business much-needed cash. You can switch to telecommuting, rent hotel meeting rooms, use a smaller space, and save money.
Don't sweat the small stuff, but don't spend too much on it, either. Little expenses — office supplies, uniforms, morning coffee and bagels for the staff — can add up to be a big expense. This doesn't mean you should cut out all the extras or demand that your employees bring their own staples to work. Just be aware of what you spend on, make sure you shop around for the best prices, and don't purchase things that aren't needed or used. If that office supply closet already has 31 reams of printer paper, do you need more?
Internet and Phone Service
If you haven't done any price comparisons on your Internet and phone service in the last six months, start today. You may find that you'll save money by cutting off that business line and getting company cell phones, or vice versa. It's not just about the cost, however. It's about what best meets the day-to-day working needs of your team. Figure out what they need to do their jobs efficiently, compare services and prices, and then take it one step further by personally talking with a manager to negotiate an even better deal. Remember, those services are also businesses and they want (and need) your business. Let them earn it. If they're not willing to at least talk about a better price, a better deal, or a better contract, go talk to their competitors.
You should also make it a habit to compare fees charged by your financial institution. What are you paying in monthly banking fees, and can you find a better banking relationship somewhere else? If you find that you can, make a call to your current bank's manager and ask for the same terms that you can get somewhere else. You may be able to negotiate a better deal without having to switch your account.
Watch your late fees and interest charges, too. These can add up to huge costs if you're not careful. Obviously you can't always avoid interest on inventory payments and the like, but there's absolutely no sense in losing money on a late fee just because you forgot to pay a bill. Schedule your payments, check your accounts regularly, and pay your bills before they're due. If you know you won't be able to pay by the due date, call and ask for an extension.
There are also a few less-obvious ways you might be leaking money in your small business. Ask yourself these questions to find the holes in your financial ship.
- Am I adamant about doing everything myself or do I hire and train help as needed? Am I doing $10/hour jobs instead of hiring a $10/hour employee? Am I using my time as an owner of a small business should?
- Am I paying more for consulting or professional services (legal, accounting, etc.) than I should? Would I save money by hiring someone full-time for this function, or are there creative ways I can get these professional services for less than I’m paying now?
- Do I have clearly stated policies and procedures for my employees? Do I have understandable, clear policies on vacation, sick days, personal days, insurance, benefits, liability, and the process of hiring and firing? Reinventing the wheel every time an issue comes up is expensive.
- Am I taking advantage of free public relations opportunities, or do I have an employee doing these things? Am I building a web presence, answering queries on HARO, producing content, going to events, keeping up with my industry, putting out press releases, being part of my local business community?
- Do I have a way to measure the efforts and money I put into marketing, or am I just throwing stuff out there and hoping it works?
- Am I stuck in traditional ways of running my business, or am I willing to let go of old methods that don't work and move to more efficient systems? Am I taking advantage of cloud-based systems?
- Do I see change as an opportunity and a chance for growth, or do I resist change and miss the opportunities? Am I willing to consider ideas that are new, foreign, or intimidating? Am I willing to try new ideas even when they're not mine?
- Do I complete what I start? Do I ship the product, or do I waste time and money on projects that begin but never make it to the point of profit?
Plug these leaks, and you can keep your ship moving steadily ahead, in good weather and bad.