As an entrepreneur, you need money to run many aspects of your business. However, you must differentiate between necessary and frivolous expenditure. The primary reason many small businesses fail is the lack of capital. But, this is not necessarily due to under funding. Sometimes what drains the capital for these companies is spending money on unnecessary ventures. Here are five things businesses waste resources on, and that you should avoid by all means.
1. Over-Outsourcing of Tasks
There are many chores involved in running a business, and many entrepreneurs believe they must outsource them since they think the tasks cannot be performed in-house. Indeed, there are tasks that you need to outsource given their nature and complexity. However, many businesses get overwhelmed with the idea and end up thinking they should outsource as many items as possible. Spending thousands of dollars outsourcing on projects can eat up a huge portion of a small business’ budget. If such projects are recurrent and ongoing, you need to consider hiring a full-time or part-time employee to handle the job. The advantage is this person will be fully available to work for your company, and it will save you gobs of money, effort and time.
People often think the more money they spend on marketing, the more sales, profit, and leads they will generate. This is one common misconception, and primary reason marketing ends up being risky. Your marketing campaigns should be tailored to your available budget, target audience, and the quality of products you are selling. What has worked for another business may not necessarily work for you. So, choosing the most expensive marketing methods without weighing your options is a sure way to lose money. Instead, find out which method best suits your business then determine how much you should invest in the marketing campaign.
3. Expensive Technology
Many businesses end up spending too much to buy the latest technology. The allure of technology nowadays for entrepreneurs is inexorable. Most people’s social lives are devoted to the internet, and tech gadgets keep them tuned in. So, businesses find it most reasonable to invest in such devices to stay abreast with these trends. However, there are extremities in this area when it comes to business. Only measure technology with your needs and leave the rest. If your business grows and you come to a point where you need an upgrade, go ahead and get it. At that time you will know that it is necessary. However, when you are just beginning as a business, and you buy technology that is of a far higher level than you need, you are likely to exceed your budget and end up hurting your business.
4. Costly Office Space
It is important to have a nice space where your team can work from, and where your clients feel comfortable when transacting business with you. But, the cost of getting such an elegant space can be quite high. Instead, focus on growing your business and creating a positive stream of revenue first. A classy office can come later. You can begin by working in a shared office space, or a residential area like your home, and direct your funds towards growing your business until necessary.
It is exciting and motivating to see your company grow and hire more employees. However, if you are not ready, this venture can be quite expensive. Having more employees translates to more salary expenses, overhead costs, medical coverage, pensions, etc. According to the National Federation of Independent Business, small businesses spend most of their money on employees’ salaries. Thus, keep the number of your employees modest until you can afford more staff without inconvenience.
Your profitability in business will depend on the kind of strategies you employ, how much money you save, and how equitably you allocate your resources. So, avoid overspending and do a thorough investigation before investing in any ventures, and you can be assured of success in your business.