Do you know the biggest ways most small businesses waste money?
Small businesses often operate on finances that are either limited or just enough for their projected budget.
However, these businesses might not realize that they have been spending unnecessarily and using their money on circumstances that could have been prevented.
Sometimes, they could be aware that they are wasting money, but most of the time, they are not.
So, if you are a small business owner and you are eager to find out all the ways your small business is wasting money; just read this article with rapt attention and you’ll find out all you need to know.
It is crucial for small businesses to learn proper money management strategies.
This would help reduce known and unknown unnecessary operational costs.
The Biggest Ways Small Businesses Waste Money
The first step to reduce waste of money in your small business is to identify what activities or business expenses you might be wasting money on.
Hence, here are some of the biggest ways small businesses waste money and some money-saving tips to help you overcome this problem of wasting money in business.
Using Incorrect Marketing Strategies
This is one of the biggest ways most small businesses waste money.
Most small business owners often believe that if they spend money on different types of marketing campaigns, they’d earn more leads, prospects, clients, and partners.
Hence, they spend more money on all possible marketing types, hoping that they’d get more customers and profits in the end.
This kind of thinking has to stop.
Marketing is based on the types of goods and services a company is producing and selling, and as such, not every marketing method out there will effectively bring in clients.
The ideal thing to do is to conduct research on the best marketing methods that fit your products first before planning a marketing campaign.
As a business owner, you don’t need to pick out the most expensive marketing option.
You need to pick the most effective method.
That will surely bring in more clients and prospects than going all out on various kinds of methods.
Tips On How To Deal With This Problem
Crafting a cost-effective marketing campaign also needs an understanding of your target market.
Most of all, you need to consider the allotted budget and stick with it at the most.
Of course, watch out for the quality of your campaigns.
Think out-of-the-box and be as creative as you can be to market your products well while reducing business expenses.
Let’s say you run a small clothes boutique for women.
You have a physical as well as an online store.
It could be a waste of money if you’d try to promote your products through incompatible methods like multi-level marketing or broadcast advertising.
They are both well-known advertising methods funneling in sales for other business types, but it certainly isn’t a fit for your clothing shop.
Cost-effective marketing methods for you may include direct marketing, Internet marketing, and social media advertising.
Most Businesses Waste Money On Staff Recruiting And Management
Another area most small businesses waste money is getting employees or staff for the business.
Your small business doesn’t need big staff to run your operations.
Employing several staff members that are doing too few tasks is certainly among the unnecessary expenses in business.
Some business owners think that the more staff they employ to do specific tasks, the better their businesses will operate.
These entrepreneurs have managers for every little nook and cranny of their business.
They might even have several sub-staff that can actually take over the work of the managers.
The point here is that you don’t need to man all the smallest parts of your business separately in order for it to run smoothly.
Some jobs can be merged together and still not feel like a burden to only one employee.
Other employees may even be willing to take up tasks because they’ll feel like all their skills will be properly utilized.
So, How Do You Take Care Of This Problem?
It is important to scrutinize your employee’s skills during your initial hiring process.
This is to give you a hint on the employee’s full potential.
You can then assign him/her a reasonable amount of work to make him as productive as he/she can be, considering his capacity and limitations so as not to overburden him.
Doing all these during your initial hiring process will save you from hiring too many employees that you might need to let go of later on.
Another factor to consider is the positions these employees will be filling.
You don’t need to hire different people to fill separate but mergeable jobs.
Assess the tasks that both jobs will be requiring and merge them as much as possible if they are closely aligned with each other.
That way, you’ll be hiring fewer people and that’s a way to stop wasting money on unnecessary staffing costs.
You can also explore hiring freelancers at affordable rates from platforms like Fiverr.
Wasting Money On Too Much Outsourcing
This is another aspect where most small businesses waste money.
Outsourcing tasks and projects have become a popular trend nowadays.
Small businesses feel that outsourcing will help relieve themselves of the burden of complex tasks.
The tendency is that they feel carried away with the idea and outsource too many tasks that can otherwise be handled by their regular employees.
Outsourcing is often thought of to help small businesses save money.
Indeed, it can save operational costs if done properly.
However, going overboard on outsourcing every single task in your company is a surefire way to waste company funds without you knowing it.
How Do You Prevent Spending Too Much Money On Outsourcing?
There are some tasks that indeed need outsourcing, such as accounting, data entry, and IT operations.
Accounting and IT operations need skilled people to complete the work properly.
Data entry is a repetitive task that is best outsourced to free your regular admin employees for more productive work.
But other tasks like graphic design can actually be handled by your regular employees.
For instance, graphic design can be effortlessly taken by your marketing team.
In this case, outsourcing the job might simply add to your business’s unnecessary spending.
The key here is to identify the core business processes and jobs that your own employees can truly handle by themselves.
Then, outsource tasks that seem too complex for your team to handle.
Additionally, you can outsource simple but repetitive tasks.
This is so that your team can focus on more productive work.
Again Fiverr is a great platform for finding freelancers to outsource to.
Spending Much On The Unnecessary Purchase Of Advanced Technology
Technology is an important part of running a modern business.
The need to connect to customers is driving small businesses to use software and technology that makes them visible across all Internet-capable platforms and devices.
However, many small companies spend a lot on fancy software to manage and track simple business processes.
Hence, costing them hundreds to thousands of dollars in wasted operational money.
This is a mistake that must be checkmated if you truly want to stop wasting money in your small business.
Also, the need for faster speed, better lead generation, and automated business processes lure small business owners into purchasing the latest and advanced technology.
However, these advanced technological products might be too much for a small business dealing with minimal business processes yet.
To Solve This Problem of Wasting Money On Advanced Technology
Small businesses can make do with simple technology programs that can handle their basic business processes such as finance, marketing, sales, and customer service.
Chances are, their operations are still smaller compared to well-established companies.
Hence, the need for high-speed programs and similar technologies are significantly less for small businesses.
In order to stop wasting money, small businesses can purchase basic program plans that suit their immediate needs first.
They can upgrade to premium plans that offer better automation, faster speed, and other sophisticated features once their businesses have already grown steadily.
Using simple technology is a great way on how to reduce expenses in a company.
Poor Expense Tracking
A simple yet often overlooked way of wasting money in a company is by not keeping an accurate record of all expenses.
Businesses are so focused on how to save money that they forget the most basic way to do so which is to keep a keen eye on the cash that flows out of the company.
Poor expense tracking happens when a company doesn’t notice where some of the outward cash flow goes.
Money is spent on a certain thing, but it isn’t properly tracked on the financial records.
That expenditure may be minor in nature, so business owners often brush the tracking off.
However, if these kinds of expenses happen again and don’t get tracked, they’ll eventually add up into an enormous amount.
Unnoticed expenses will eat up a huge chunk of your business’s budget and will lead you guessing where that large sum of used-up money went.
Proper money management starts with recording even the tiniest and seemingly insignificant business expense you’ve had.
Doing so will save you the headache of not being able to track your expenses.
Tracking all your expenses is a great way of reducing business expenses in the long run.
Attending Too Many Trade Shows
You want your small business to gain visibility in your niche.
One way of doing so is by attending a trade show.
This activity is an exhibition attended by many companies to showcase their products and find new trends in their respective industries.
However, some small business owners tend to overdo it by attending too many trade shows.
After all, it’s their chance to up their game and make themselves known to both customers and potential business partners.
They attend all the trade shows they get wind of and set up elaborate booths for their products.
All these efforts may seem good for their brands, but they can also be too much.
Attending every trade show in town and going over-the-top on booth decorations can be extremely costly for the small business owner.
So then; How do you stop wasting money on trade shows?
Attend those events that truly make your brand shine.
Not all trade shows will be worth your attendance, so choose your events wisely.
Keep in mind that there are other ways to showcase your products, and trade shows are not the only venues of product visibility.
Another tip is to not go overboard with your trade show booth.
Your products will speak for yourself.
Fancy trading booths won’t boost your visibility, your products’ quality will.
Set up your trading booth without going overboard yet in a way that people will notice your brand.
This will help you save a lot more in the long run.
Energy-Wasting Appliances and Unmindful Electricity Use
Simple office appliances such as light bulbs and computer sets play a huge role in a small business’s operational expenses.
Using appliances that are not energy-efficient is among the common ways most small businesses waste money.
A simple switch to energy-efficient appliance models will save most businesses hundreds of dollars in electricity bills monthly and annually.
These appliances are also friendlier to the environment and also help reduce the company’s carbon footprint.
Tip on how to save money on energy consumption and electricity bills.
Take light bulbs for instance.
If you use an incandescent light bulb in your store or office, that could cost up to $20 in expenses per bulb.
Switching to energy-efficient fluorescent bulbs cuts the expenses because each bulb has an estimated money wastage amount of only $2-$5.
Fluorescent bulbs also give off better lighting than incandescent bulbs, which may result in lesser bulbs needed to illuminate your store or office.
Installing low-wattage light bulbs is also a good money-saving idea.
If your business doesn’t run 24/7, it’s a sound decision to turn off desktop computers as soon as possible after office hours and at night.
Each computer turned off at night will save you $30-$70 compared to computers that were placed on idle mode only.
Simple acts such as unplugging unused appliance cords after use can also help you save money on corporate electricity bills.
Wasting Office Supplies
Recklessly spending on office supplies is yet another big way most small businesses waste their money.
Unnecessary paper, stationery, and electronic supplies all contribute to workplace waste and ballooning operational expenses.
Here are a few suggestions on how to save money on office supplies.
- Cut off on paper use by using email to circulate memoranda and messages, instead of printing and distributing hard copies.
- Maximize paper supplies by reusing document backsides as scratch note pads.
- Fewer paper supplies also mean less use of clips, so consider decreasing the number of clips procured from the stockroom.
- Use computer ink wisely.
When printing documents, use two-sided copies as much as possible and set copiers and printers to work with lesser ink levels.
- Recycle carton supply boxes and turn them into file containers instead of purchasing new plastic boxes.
These carton boxes may also be used for shipping purposes.
- Get rid of unusable office equipment such as old computers and typewriters by selling them to recycling companies.
- Buy your essential office supplies in bulk.
Find suppliers that are willing to give discounts for the number of office supplies you need to purchase in bulk.
All these ideas will help you cut unnecessary expenses in business, office, and store supplies.
Early Space and Equipment Purchase
Some business owners estimate their growth so quickly that they feel compelled to purchase upgraded office equipment to help accelerate goods production.
Others even rent or buy larger spaces in an early attempt for expansion.
This activity is called premature purchasing.
This is the act of buying the things needed for business growth without the clear immediate need for it.
Doing this may damage your business’s budget if you decide to upgrade everything, only to realize that your business doesn’t meet that early and steady growth you were expecting.
The result is equipment and business space that may not be used even for the long term.
Tip On How To Avoid Premature Business Purchases
Upgrade your equipment and office/store space if you are absolutely sure that cashflow is good consistently and there is a slim chance of your business crashing.
If your business crashes, your purchases will become useless.
In addition to this, it also impacts your business’s account negatively.
You might also struggle with regaining a cash flow that can support the expenses you gained from prematurely buying the equipment or space.
Paying Too Much Taxes
Small business owners like you might not realize that you’ve been paying high amounts of taxes, even more than what you’re supposed to pay.
Doing so will significantly hurt your business’s funds.
There are two main factors that might be responsible for this and they are;
- The business owner is unaware of the existence of tax deductions.
- The company doesn’t have an accurate expense record.
This record is required for an entrepreneur to file for tax deductions.
Suggestions On How To Spend Less On Taxes
If you are a business owner falling into these factors, best consider hiring an accountant or tax specialist.
They can help you keep accurate expense records and assist in properly computing taxes due minus the tax deductions.
This is a significant tip on how to reduce expenses in a company.
Conclusion On The Biggest Ways Small Businesses Waste Money
Small businesses are prone to wasting company funds in a variety of ways.
The amount of money that these businesses use to grow their enterprise can be gone in an instant, if not properly managed and shielded from common money-wasting activities.
You can overcome all these issues with the money-saving tips and suggestions discussed in this article.
Keep them in mind and apply them to start seeing the different ways you can save money in your small business.
Other helpful articles have been linked to this one.
Do check them out because you don’t want to miss out on the useful information they contain.