Are you throwing money down the drain without realizing it? There are many areas of business in which companies commonly overspend on things that aren’t necessary. Cutting away these wasted expenses could allow you to take in more profit or spend more in other important areas. Here are just several ways in which companies commonly waste money.
Having your own office can have its benefits, but for many small modern businesses it’s an unnecessary expense. Not only could you save money on rent by doing away with an office, but you could also save money on energy bills, cleaning and maintenance. The result could be hundreds (if not thousands in some cases) of dollars saved each month.
The most practical alternative is to work from home. Most jobs require only a computer and a phone. When it comes to meeting clients, you have the option to use videoconferencing or you could even meet in a coffee bar. It’s even possible to hire employees virtually whilst working from home – you can communicate via the internet/phone and share information on the cloud.
Working from home isn’t for everyone and some businesses may find that they benefit more from having a space in which they can communicate with employees more effectively and host clients. In such cases, shared offices are always a cheaper option if you’re a small business. This involves sharing premises with other companies and whilst you will have to pay some rent and extra expenses, it’s likely to be a lot cheaper than renting an office to yourself.
Personal office space is only really suitable for large companies in this day and age. You can of course save money by renting in a cheap location. These days it’s easier to pose as a company in a prime location due to virtual address services such as 1st Choice Formations when in fact you could be based in a cheap suburb. This could allow you to maintain a professional image whilst paying little on office space.
Many companies spend huge unnecessary amounts on business equipment. Whilst this equipment is often needed for the job, many company owners source it from the wrong places or invest in expensive models when the cheaper models will do.
When it comes to choosing models, it’s important to only buy equipment with features that you physically need. There’s no point paying for an industrial printer that can print out 120 documents in a minute if you rarely ever print out more than ten documents at a time – you’re simply paying for features you’ll never use.
Then there’s the mistake of buying brand new when used equipment will do. Whilst brand new machinery can be more reliable and energy-efficient than older equipment, it’s still worth looking into used equipment – you can still find fairly modern industrial machinery in good condition being flogged online on sites like Gumtree for a fraction of what you’d pay for a brand new machine.
There could be times when you use equipment so infrequently, that there’s no use in buying it at all – simply renting it out in these instances when you need it could be a more financially sensible decision. For example, if you own a construction company and rarely ever need a crane, you don’t want to be paying thousands of dollars to buy a crane outright. Finding a hire company that rents out Liebherr cranes could save you huge amounts of money. You’ll find hire companies out there for everything from event marquees to carpet cleaning machines.
Marketing is necessary for attracting new customers, but most business owners waste huge amounts of money on the wrong strategies. Such expenses can seem productive on the surface – designing a billboard or taking part in a trade show feels like an achievement because of the work put into it, but if you’re not making any new customers from it, it’s all just money down the drain.
People often make the mistake of thinking that there are one-size-fits-all marketing strategies out there, but this isn’t the case. You have to do your research to find the best marketing strategy for you. Research could include talking to a focus group, giving customers feedback forms or reading marketing analytics – all of these can help you to focus your marketing strategies in the right direction. This can prevent you wasting money on trial-and-error marketing campaigns aimed at the wrong places and the wrong audiences.
A lot of business owners also waste money on marketing by hiring professionals to do tasks that they themselves could carry out for free. A good example of this is designing a website for a small business – many budding entrepreneurs believe that they have to hire a web designer to build a website, when a custom-built website on WordPress could save a lot of money and be just as effective. Not only are platforms like WordPress free, they’re also easy to use and require no coding knowledge. Other marketing methods that can be DIYed include social media marketing, email marketing, blogging, vlogging and general networking.
Obviously there are some marketing jobs that are better outsourced due to the technical knowledge required such as SEO, app development and packaging design. In these cases, always shop around to collect quotes from marketing companies so that you can find a service that’s affordable.
Employees can also be a source of unnecessary expenditure. There are lots of ways in which your staff can waste your money, the most obvious being overstaffing – if you’re struggling to find tasks for all your employees to do, you’ve probably got too many employees working for you. For every full-time excess worker, you could be wasting thousands of dollars a year.
Hiring the wrong employees can also be an expensive mistake. Bad employees may lose you money through bad customer service, laziness, lack of punctuality or by simply having a toxic presence that causes good employees to leave. Hiring ill-suited employees is often the result of rushing the recruitment stage - by taking more time to collect applications, interview applicants and get to know their strengths and weaknesses, you make better decisions when hiring.
It’s also possible to spend too much money on staff resources. Many companies can end up spending huge amounts on supplies simply by not controlling how much their employees are using. You can get around this by putting a quota on certain resources such as printer paper or getting employees to pay for certain resources out of their own pocket such as fuel in a company car. Of course, you do need to be careful of being too stingy – charging employees for every sheet of toilet paper they use could be seen as excessive.
Taking out unnecessary loans can is also a common way in which many businesses waste money. While some loans can be essential when starting a business, many companies take out loans simply to cover everyday cashflow problems. These loans end up accumulating interest over time and can end up being a huge extra expense.
It’s worth always having some savings set aside for emergencies that you can dip into instead of having to borrow money. It could be worth setting up a business savings account - some of these savers have great interest rates so you’ll build your savings over time.
If you do have to borrow money, always explore your options. Peer-to-peer lending is a popular form of borrowing money and involves borrowing from other users online - these loans often have low interest rates compared to bank loans and private loans. Be especially wary of taking out credit cards of lines of credit for business use - it can be very tempting to keep using these borrowing methods due to their convenience, but you can rack up a lot of debt, plus interest rates are often variable.