Oh, I know. When you start a business you’re so excited and full of enthusiasm. You want to have EVERYTHING you could possibly need to give your business the best chance. And you will happily throw your hard-earned savings at it, willy nilly until one day…you wish you hadn’t!
In the early days you don’t know what’s a good idea and what isn’t. You don’t know what you need and what’s just a ‘nice to have’ (or a ‘don’t actually need at all’). You’re learning as you go and you take advice from everyone, even when it might not suit your business.
Even as we get more experienced in business, we still waste money on things we simply don’t need.
From experience, here are 11 things that small business owners spend money on when they really don’t need to. This isn’t to say that you should never spend money on these things – many of them work brilliantly, however the cash is better in your pocket while you’re building your business.
Cashflow and lack of working capital is one of the main reasons small businesses fail – they spend all their money on fluff and guff and ‘looking good’ and then run out of money.
Think twice before you start to spend your carefully-saved money on things that really aren’t going to bring a return. What are the main culprits? Here, let me tell you my thoughts, but this is not an exhaustive list.
An overly-expensive website
Yes, of course you need a website. Websites are a great way to get found by potential customers.
What you DON’T need is one costing several thousand pounds right away (if ever). It’s all about the content. Even a free or cheap website can drive enquiries and sales brilliantly if the content is right.
The trick is to work out who is most likely to buy from you and aim your marketing at them – including your website. There’s no point trying to attract people who are realistically never going to buy – write your website for those people who are a great fit for your business and include the information THEY need to be able to make a buying decision.
New businesses get bombarded with deals and offer from newspapers, websites and magazines almost from the day they start up. Your challenge is to resist the deals.
Remember in #1 where I talked about the person who is most likely to buy from you? They are your ideal customer and unless the publication or website in question is specifically aimed at your ideal customer, say NO.
If it’s not going to reach the people who are most likely to buy, don’t buy the advertising. You can use that money for something else.
If you’re working from home and you’re hankering after a workspace of your own, renting premises can look really appealing.
The thing with renting a room or a building, though, is that there is usually a fairly long contract. Not only that, you’ve then got to furnish it, get internet installed, maybe contribute towards rates and service charges. Before you know it, your modestly priced room has turned into a monster you’re stuck with for 6 months or a year, or longer.
If you can get away with working from home, do it for as long as possible. I still work from home and I LOVE it, I wouldn’t have it any other way. See if you can jiggle things around at home to accommodate you – can you take over the spare room, get an insulated garden shed, camp out in the conservatory. Keep your costs down for as long as you can – then, when you know your business is healthy and paying you and making a good profit, THEN think about committing to premises.
Promotional items and flyers
It’s so tempting to buy a boxful of fliers, 500 business cards, a few hundred pens, coasters and mugs because they look beautiful and you’re so in love with your logo.
However, that money could have been part of your salary. It could pay a tax bill. Far be it from me to rain on your parade but unless you have a specific use for these things, don’t buy them. By all means get a branded hoodie to wear, that’s a great talking point and good advertising.
The rest can wait. Get 50 business cards and see if you use them. Leave the pens, mugs and coasters until you can justify them. Unless you’re planning on doing a carefully-thought-out door drop in a really, really promising neighbourhood, there’s a good chance that box of fliers will still be acting as a door stop this time next year.
Membership of expensive networking groups & associations
You may think that it’s absolutely essential to join certain networking groups but think long and hard before dishing out your hard earned cash.
Some groups can cost you around £1000 per year – how likely are you to get that back? I remember when I started out, I paid out for the Federation of Small Businesses, The Chamber of Commerce and a whole load of other organisations because I thought I should. In actual fact I didn’t get a single piece of business from either (although the FSB did come in handy for the free legal helpline a few times!)
I did, however, get business from my local business club which cost around £50 per year and put me in front of people who were likely to buy from me – my ideal customers.
Tons of stationery
My name’s Claire and I’m a stationery addict. I remember getting my hands on a stationery catalogue and ordering folders, binders, calculators, envelopes, before I knew it I needed a special cupboard just for the stationery. A few years on and I’ve still got most of the darned things left.
I never used them. What I do allow myself these days is as many pretty notebooks as I want, because I use them all the time and give them away to clients. Keep it simple. Don’t spend loads of money on stuff you don’t need. Buy what you need, when you need it, in small quantities. When you find you’re running out often, then bulk buy but not until then.
It’s so tempting to think that you need the Pro version of this, and that really expensive database system that the big brands use but do you REALLY need it? I’m thinking not. Make do with free and low priced options for now.
Use trial accounts to make sure you can’t live without this particular piece of software. I can usually tell after 3 weeks if I’m going to stick with something. Software is just a tool. It doesn’t make your business better. It might save you some time or make a job or two easier but there are so many great budget options out there for almost every job, from task management to accounting, email marketing to social media management that you really don’t need to invest loads.
Hands up if you’ve thought about leasing a car through the business, or decided that there is no way you can show up to business meetings in your battered old Ford?
You’re not alone. So many people think that they *should* have a better car because it reflects on their business. In truth, the only thing that really matters in your business is the product or service you provide, and how good it is.
Customers don’t care if you have a beat up car if you are brilliant at what you do. They aren’t going to think any worse of you, so don’t go spending a whole lot of money on something that really doesn’t help your business at all. Save up, buy a little car outright – if you lease one, you’ll get hit by loads of tax.
It’s just a car and the best car in the world won’t fix a bad business model. Focus on your customers and your business offering THEN when you’re making loads of money, treat yourself to a car just because you can.
Oh my goodness, the amount of businesses I see taking up offers and deals on franking machines that, frankly, don’t get used (did you see what I did there?). You don’t need one. You don’t need one! Just go to the post office.
I get so sad when I see ailing businesses spending thousands on trade shows that just don’t bring in the business.
The truth is that it’s not just the cost of the stall at the show, it’s travel, accommodation, food, stuff to decorate the stand, freebies and time away from home.
Trade shows can turn into a monster. And how many things are you going to have to sell to make THAT money back? It’s eye-watering.
Try being a visitor at trade shows for a few years. Make your contacts there. That way you save loads of money and aren’t tied to a stand all day. You can still suss out who you need to speak to, you can get advice from other stall holders and you can save your money. You don’t NEED to be there. There is always another way.
Whether it’s a tee on the local golf course, the local football team or carrier bags for the dogs home, sponsorships are everywhere and they are very rarely a good business decision.
If you are sponsoring a tee at the golf course then really, unless you’re specifically targeting middle aged male golfers, you’re wasting a whole lot of money.
Yes, they might all need an accountant but they are playing golf! They might be on a business golf day but then they are talking about THEIR business. It’s unlikely you’re going to get a return on your investment. Sorry. If you’re doing it as a kind gesture and to help out a local project, that’s fine – just don’t convince yourself it’s a business investment!
So be frugal. Save your precious cash for when you need it. It’s FAR better to make do and save your money in the early days and work out what you really need as you go along – I promise you’ll kick yourself if, a few months down the line you can’t afford something you REALLY need because your money is tied up in stuff you’re not using.
What did YOU waste money on in your business that you just didn’t need or could have done without? I’d love you to share in the comments!