At the end of the month, do you look at your books and wonder where your money is going? Often, there are places where your small business is wasting money, and you might not even realize it! Today we want to highlight some areas where you might be able to tighten spending and start putting more profit in your pocket. You might be surprised where you can find savings.
Hiring Versus Outsourcing
Do you have team members? Are they contractors or employees? Depending on where you are in your business journey, it may be better to stick with contractors instead of hiring employees. When you hire an employee, it costs more than just salary. When you add in benefits, payroll taxes, and HR expenses, an employer pays an average of 25 to 40 percent markup on a base salary! If you’re paying a temp company for that contractor rather than paying a contractor directly, however, you are probably paying those markups without the benefits of being a full-time employer.
There are definite points in business ownership when hiring an employee makes sense, but keeping your team small and outsourcing tasks to contractors can keep your costs low.
If you do have employees and you feel like you’re constantly hiring new people because they keep leaving, this is a big place to save money. Whatever the reason your employees are going, it adds up in terms of money you have to spend. Not only can losing an employee put a strain on your remaining team, but you also have to hire again.
Hiring can involve paid recruiters, time to interview, and time to train. These activities cost time and money, which can be tough on a small business. If you find that you have high turnover in your business, it may be time to look at your company culture and how your employees feel about working for you. It is far more cost-effective to keep your team happy than hire a new one.
Over Paying Taxes
Overpaying taxes is a prevalent place where businesses are wasting money. We always recommend having a professional prepare your taxes as they are experts in finding deductions and ensuring you are not overpaying. Hiring a bookkeeper to assist with record-keeping and a CPA or tax preparer for income taxes can be invaluable. As you grow your business, this is one of the first places I recommend you spend money to save yourself the headache and stop wasting money.
One of the biggest wastes of money is recurring subscriptions. Since they are set to charge automatically, they are often forgotten until the charge has occurred. They are usually small amounts and are often overlooked as a place to save money. But if you have 5-10 monthly subscriptions of $25, that is $125-$250 per month and $1500-$3000/year! It adds up! This can be especially cost-effective to check if you changed CRMs or website hosts recently and kept the old one up “just in case” but forgot to cancel it. If you use your subscriptions, great! We often find that most business owners do not utilize the tools they are paying for monthly. Take stock of what you use and start canceling the things you don’t. You will be surprised how much you save!
Growing your business is very exciting and sometimes can result in making purchases before you need to. When companies aren’t clear on their objectives, or they don’t have a clear vision of where they want to go, it can lead to unnecessary spending and wasting money.
Things that could be considered premature spending might be technology, courses, or even services from other professionals. If you are not ready to use it almost immediately, there is no need to spend. Often, if you are not prepared to use it, by the time you are ready, there is something newer that meets your needs, so you buy twice.
Advertising and Marketing
This may surprise you, but marketing and advertising can be some of the biggest money wasters in business. What takes them from a necessity to a waste of money? The answer is not measuring your Return on Investment (ROI).
Many business owners try different marketing and advertising activities without ever looking at the impact on their bottom line. Before you spend a single cent on any visibility activities, you need to have a plan to measure and determine success or failure. Without reviewing your results, you might keep spending money on things that do not work or abandon activities that work well.
The past 2+ years have taught us that having an office is not always necessary. This is especially true if your business provides professional services based on knowledge (marketing, bookkeeping, etc.). With the availability of communication technology and the normalization of remote work, you might consider if you need a proper office.
If you do not like being a 100% remote working business, consider sharing an office with a fellow entrepreneur or renting an office in a co-working space rather than shouldering the massive costs of having your own space. A co-working space generally covers all the recurring expenses like internet, utilities, and building insurance.
Tasks that Can Be Automated
After being in business for some time, you learn that there are some tasks that you have to perform over and over. You might find yourself crafting the same response to commonly asked questions or sending monthly invoices. Tasks like these can be put into automated systems, so you do not have to spend time over and over. Your time can be better spent on revenue-generating activities.
Sometimes, trying to do everything results in missing more profitable opportunities. Creating systems is a low-cost way to free up your time to focus on things that will increase your bottom line.
Set up a complimentary discovery call today if you want to take a look at your financials and need some help. We love helping our clients find more profit in their business by eliminating wasteful spending!