Running A Business? Don’t Overspend on These 14 Common Expenses
As a business owner, you’ll have a lot of expenses and investments to weigh as you grow your company. For instance, you’ll likely invest in certain technologies, services and processes that help your company progress. However, when you’re working with a limited budget, it’s important to weigh the pros and cons of each business expense.
Is a current process the most efficient, cost-effective way forward, or is there a better path to achieving the same result? Is that “state-of-the-art” equipment or technology an essential purchase, or is it just something that would be “nice to have”? Are you paying for a product or service that can really help your business grow, or are you just following a trend in the headlines?
To help you make these decisions, below, members of The Mint Team talk about processes, services and products many business owners regularly spend too much money on, and what they could be doing instead.
1. Manual Audits
We consistently work with large organizations that waste thousands of dollars manually auditing their high-risk corporate spending (such as employee expenses, p-cards and accounts payable processes). The cost of the labor, plus the cash leakage from what they miss, is eye-opening. Modern finance teams using AI-powered audit technology transform this effort to achieve significantly better outcomes.
2. ERP/Accounting Software
Expensive accounting software comes with more expensive staff. We work with QuickBooks. Most people think it’s just for small businesses, but our customers are businesses with between $1 and $25 million in revenue. There are a lot of businesses that are oversold into a higher level of software that they are not ready for yet, and they end up functioning in Excel while still paying for fancy enterprise resource planning software.
3. Tracking ‘Vanity’ Metrics
If not well monitored and thought out, marketing can turn into a money hole. It’s easy to get lost in metrics that don’t generate sales. Click-through rate, page views, article likes—each one is good only if it connects to a larger strategy of bringing in business. Make sure you have a direct tie to your sales strategy for every marketing action and result to prevent falling for “vanity” metrics.
4. Marketing Not Focused on Lead Conversion
Business owners allocate an astronomical amount of their working capital to marketing. The psychology behind this stems from the urge to mirror the perceived successful actions of larger companies. Business owners should focus their funds on lead conversion and improving operating efficiencies. Marketing is the cherry on top, but let’s not forget that we got the cherry for the ice cream.
5. Marketing Agencies
Business owners often hire marketing agencies that are not the right fit. Marketing agencies can do wonders for your business, but you have to consider your target audience, what channels they are active on and if the marketing agency can help you reach them. Alternatively, consider hiring an in-house marketing person or team who’s dedicated entirely to your business.
6. Antiquated Marketing Techniques
At the top of the list is doing antiquated marketing that is difficult to track and has a low likelihood of generating a profit. For example, if a business owner spends $10,000 to sponsor an event and gets no stage time, odds are high they will lose money. Yet if the same $10,000 goes to YouTube ads with a trackable sales funnel leading to a phone appointment, odds are high the business owner wins.
7. Premature Outreach
I see business owners spend money on ads to attract new clients when they haven’t even made an impact in their community yet. Focus on making sure everyone in your town knows who you are and what you do, instead of creating a target list on Facebook of people who don’t know you. Become the “mayor” of your town with your service or product and you will see a greater return than you’d get from any ad out there.
8. Coaches
I think business owners widely rely upon and spend too much money on coaching. Coaching usually focuses either on a lack of knowledge or a lack of personal accountability. Instead, leaders should spend more on education in the areas they feel they need coaching on. This gives them continual knowledge to draw from and fosters self-reliance. When accountability is where you’re lacking, it may still make sense to pay an accountability coach.
9. Third-Party Experts
Third-party experts can be a very large waste of money for large and small corporations. Many executives in large companies will spend money on third-party experts in order to remove the responsibility for a decision from themselves. Outside experts can be helpful in certain instances, but usually, they are brought in simply to protect an executive from the consequences of a bad decision.
10. Recruiting Agencies
Recruiting agencies that do not understand your target employee are a waste. Instead, have an in-house recruiting team or use a partner who takes the time to understand your business and target employee. Recruiting agencies can either be a quick way to hire successful candidates or lead to a churn of new hires who are not correct fits, resulting in large cash utilization with no ROI.
11. Outsourcing Projects
Outsourcing projects that business owners can do in-house can waste excessive amounts of money. Instead, business owners can entrust some of these projects to their employees. Small tasks can offer a nice transition for an employee to go from working part-time to full-time while still saving the company thousands on outsourcing.
12. Physical Office Spaces
Given the impact of the pandemic on in-person work and the continued uncertainty around the return to physical offices, leadership teams are and will continue to be hyper-focused on the efficient use of real estate. Instead of incurring expenses related to physical workspaces, I expect many will pivot to focus on tech expenditures that support hybrid work needs and collaboration regardless of location.
13. Digital Subscriptions
Business owners need to audit their digital subscriptions with regularity. This is true of organizations of all sizes. The cost of business subscriptions and data services can quickly and easily mushroom unless carefully managed.
14. Doing Everything Alone
A big mistake that I often see is when owners try to do everything on their own. They should hire a professional to assist them with their financial tasks. Cost is important, but it can slow down your growth if you do not have other people helping you. Adding some benefits to attract top talent will help support your long-term goals.
