7 More Ways You’re Still Wasting Money In Your Small Business
You’ve likely heard about the most common ways people waste money in their small business, but there are plenty of other things you may be doing that cost you more than you realize. And as a result, your profits shrink without your knowledge or intention.
The idea of saving money may be hard to swallow, but if you want your business to survive and thrive in the coming years, it’s time for some tough love. We all know that as companies grow, they can become more expensive to operate, so we need to make sure we’re taking steps now so our expenses don’t spiral out of control later on.
Did you miss the first part of this blog post? Check it out here.
Otherwise, here are 7 more ways you're still wasting money in your small business without even realizing it!
1. Stop overpaying for the wrong type of employees/contractors
Small business owners often hire friends and family out of a sense of loyalty instead of focusing on finding someone who can actually do the job. These types of hires may seem like great people and might even be decent workers, but that doesn't mean that they're qualified to work in your business. If you're paying top dollar for unqualified (and unproductive) employees, you're wasting money!
So before hiring someone, ensure they have the necessary skills and training to do what you need them to do. And remember, don't fall into the trap of hiring because someone has a personal connection with you. Instead, hire because they're the right person for the job!
If you think about it, would you want your company to be associated with someone who isn't good at their job? So why would you hire them to do something for your business?
If an employee can't produce results, they cost your company money! So, avoid making any hasty decisions that might cause more problems down the road. Be patient and find a qualified person to do the job well!
2. Stop wasting money on tasks that can be automated or outsourced
This is one of my favorites – and easiest – ways to cut costs! From reviewing proposals, sending receipts for reimbursements, scheduling 1099 status updates, or processing online payments, you can either wholly outsource or automate dozens of manual processes with the right tools. And if you combine this suggestion with #1 above (hiring more qualified individuals), then there's no reason anyone within your organization should be doing anything manually… EVER!
3. Stop wasting money by not selling enough (or selling for too cheap)
This one is big – especially considering that 80% of small businesses fail within the first five years. There are two main reasons why this happens: new business owners have no idea how much to charge for their products or services, or they've never researched what the product/service is worth.
If you're struggling with pricing, don't be afraid to ask other business owners who are in similar industries how much they charge for their own products and services. Granted, there's always room for discounts, but never sell yourself short if you want to make a profit.
And please don't think that raising your prices is the only option. You can also provide more value with your services or products by simply offering your customers something for free.
And while I'm on the topic of value, it's important to remember that your customers are looking for solutions and results – NOT products or services. So stop selling features and start selling benefits instead! Yes, this might seem like another one of those “business buzzwords” but it's much more than that. Benefits are all about the outcome and what's in it for the customer. So focus on those instead of using confusing jargon to talk about your products and services!
4. Stop paying expensive, recurring fees for services your business doesn't really need
I'm talking about the “forgotten” subscriptions like web hosting, domain registration, or professional licenses that you've had lying around for years and are no longer using. Many people don't think to cancel these types of things because they forget about them – especially if they've been around for a long time! And let's face it – these providers WANT you to forget about them because they make lots of money from people who don't pay attention to their monthly charges.
So whether it's an old domain registration or your hosting provider charging you $10 per month for a service plan that you're not using anymore, make sure to review your current contracts and find out what you're paying for each month. And if it's not something that is keeping your business running – then cancel it!
5. Stop wasting money on home office expenses
Instagram and Pinterest FOMO is real and it might have you thinking that you need a Scandinavian minimalist aesthetic for your home office. But it's not about where you work from – it's about your business. And your business can be represented from anywhere – including Starbucks, a dedicated space in an office building or even working from the comfort of your bedroom. (Just please don't do that last one – or at least not more than once in a while!)
Seriously, if you're running a business from home and it's important for you to have an office within your house, then by all means get one. Just make sure that this area is dedicated to working only and the rest of the house.
If you're serious about growing your business but you're still allowing “home office FOMO” to dictate your home office “needs”, then it's time to stop buying into the hype. Remember, just because everyone else has an ergonomic chair or a standing desk doesn't mean you need one too! Because the truth is – Office Depot makes a lot of money selling furniture to small business owners who don't really need it. And that's why you should always do your research and make sure you're getting the best deal possible.
6. Stop wasting money on things that don't align with your business
If you don't have plans to start a podcast, don't run off to Amazon and get podcast equipment. If you're not a professional photographer, there's no need for the latest DSLR. And if you're not running a large-scale blog, there's no need for $200/mo WordPress hosting.
Instead, start saving for the things that really do matter to your business – like hiring talented people or expanding into new markets. And the sooner you stop buying unneeded equipment and subscribe to services you don't use, the sooner you'll have the capital you need to start growing your business.
It's easy to get caught up in all of the things that other people are doing with their businesses – especially when they seem to be having success from it. But remember, everyone is different and has different goals for their business. So before you try to copy someone else's ideas, make sure they're actually aligned with what you want for your business.
You need to learn how to become a master of saying "no" to the things that do not align with your business and “yes” to everything that does!
7. Stop wasting money on duplicate books/courses/workshops
Just because it's available doesn't mean you need to buy it.
One of the best ways to save a ton of money in your small business is to stop wasting money by repeatedly purchasing things you don't need.
For example, I know a lot of business owners who say they need every book on their favorite topic (e.g. marketing books). But what those same people fail to realize is that most of those books share the same ideas and information – so instead of wasting money on individual books, buy one and take your time to read it – then apply what works for your business. Trust me, you'll save a lot of money this way.
The same thing goes for workshops and courses that are available online. Sure, I know investing in yourself is important and as a small business owner, you should never stop learning and growing as a business person. So take every opportunity that's available to you and learn as much as you can whenever possible.
You just don't need to break the bank just because everyone around you is.
Remember, we all start our businesses with a limited budget, and we always want to make sure we get the most out of it and do not end up wasting money on things they don't need.
Just because the latest course is available doesn't mean it will get you closer to your goals. If a course doesn't directly align with what you want for your business, save your money and put it towards something that does.
I realize that this may come off as cannibalizing my own business, but I firmly believe in only purchasing courses, books, workshops, and conferences as needed. If you're not ready to receive the information or your business isn't quite at that level yet to make great use of it, then it's best to save your coins. Learn as you go, but know when to level up.
Conclusion
In this article, I’ve covered 7 more ways you could waste money in your small business. But there are plenty of other ways if you know where to look! To optimize every cent and get the most out of your marketing dollars, ask yourself these questions to see if any areas can use some improvement. What have been the biggest wastes of money for you? Which question from the list do you need help with first? Let me know by commenting below!
Common Ways Small Businesses Waste Money FAQ
What are the most common ways small businesses waste money?
Many small businesses waste money by hiring unqualified employees who do not add equivalent value, resulting in inefficiencies and increased costs. Additionally, maintaining unnecessary subscriptions or services that no longer provide significant benefits often drains resources.
Underpricing products or services can also hurt profitability, as it fails to cover costs adequately while not recognizing the true value offered. Being unaware of these money leaks can gradually erode profits, emphasizing the need for periodic financial reviews to align spending with business objectives.
How can I identify hidden costs in my business?
To identify hidden costs, perform a detailed review of your financial statements and regular expenses. Look for recurring charges that go unnoticed, such as unused software licenses or forgotten subscriptions.
Evaluate every expense in terms of its necessity and the value it adds to your operations. Regular audits and involving a financial advisor can provide fresh perspectives on where your capital might be leaking, allowing you to make informed decisions and corrective measures.
What strategies help in cutting unnecessary expenses?
A strategic approach to cutting expenses starts with automating repetitive tasks to reduce labor costs and improve operational efficiency.
Outsourcing non-core activities is another effective strategy, allowing your team to focus on the core functions that drive your business. Evaluate your current team and streamline processes to boost productivity without increasing headcount.
Regularly review your budget to eliminate expenses that no longer contribute to your strategic goals, ensuring that every dollar spent supports growth.
How can automating tasks save my business money?
Automation is key to streamlining operations, reducing human errors, and minimizing payroll expenses.
Automating routine tasks such as invoice processing or customer communications, you can redirect human resources towards more strategic roles that require creativity and problem-solving skills.
This approach not only enhances productivity but also allows for scalability without significant increases in cost. As competition intensifies, using technology to automate provides a critical edge and contributes to sustainable business practices.
Why is it important to hire the right employees?
Hiring the right employees ensures that your business benefits from high productivity and quality outputs, leading to better customer satisfaction and profit margins. Skilled workers bring expertise and efficiency, reducing the time and cost of supervision and corrections.
Every employee should align with your business goals and culture, contributing positively and supporting the team’s objectives. Avoiding hasty recruitment decisions by thoroughly vetting candidates saves money in the long run and fosters a robust work environment.
Hire slow, fire fast.
How can I determine the correct pricing for my products or services?
Determining correct pricing involves understanding your costs thoroughly while researching competitors’ pricing models. Consider the perceived value your products or services offer and align pricing with market demand.
Pricing should cover costs, ensure competitiveness, and provide a margin for profit. Regularly revisit your pricing strategy to adapt to market changes and customer value perceptions, ensuring long-term sustainability and profitability.
Otherwise, it's a race to the bottom, and who wants that?!
What should I consider before canceling recurring subscriptions?
Before canceling any subscription, assess whether it directly contributes to your core business functions and growth. Evaluate the return on investment each service offers and determine if there are cheaper alternatives providing similar benefits.
Often, businesses retain services that were once useful but no longer critical—removing these helps in reallocating funds to more productive uses. Periodic evaluation of all subscriptions helps ensure alignment with current business needs and strategic plans.
How do I align my purchases with my business goals?
Align purchases with business goals by assessing their potential impact on growth and efficiency. Prioritize investments that facilitate expansion, improve customer satisfaction, or enhance operational capabilities.
Draft a clear roadmap of your business objectives and cross-reference any major purchase decisions against this plan. This strategy ensures that all resources are directed towards achieving specific targets, maximizing returns, and supporting your long-term vision.
When is it worth investing in business workshops and courses?
Investing in workshops and courses is worthwhile when they offer skills and knowledge that align with your current business challenges and future plans.
Consider opportunities that address specific gaps or areas for development identified within your team or operations.
Additionally, timing plays a crucial role—engage in learning when the business can put new knowledge into practice effectively. This investment not only enhances individual capabilities but also improves overall organizational competitiveness.
How can I prevent financial pitfalls in my business?
Preventing financial pitfalls starts with maintaining a clear and detailed budget, alongside regular financial reviews to identify and mitigate risks early.
Prioritize spending that aligns with strategic goals, and implement regular training for your team to understand financial implications of daily decisions. Stay informed about market trends and competitors to adapt swiftly, ensuring your business can withstand economic fluctuations.
Cultivating a culture of financial discipline and continuous improvement keeps your operations lean and resilient.
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