Contrary to popular opinion, money doesn’t just vanish into thin air.
Sure, it might seem like the thousands of dollars that you had set aside to run your small business somehow evaporated into a cloud of white steam, but in fact it was, actually, spent somewhere.
And stopping that hemorrhage of cash is tough. And you don’t always know where your business is bleeding money. But here are 13 places your small business is losing money that you may not even realize.
At the Front Desk
For whatever reason, receptionists are often the lowest-paid employees in an office. But the person sitting at the front desk is also the first impression many potential customers, partners and vendors get of your small business. If you have someone who puts people on hold for too long, directs calls to the wrong place, is rude, or does pretty much anything else to turn someone off, well – as that shampoo company once told us – “You never get a second chance to make a first impression.” A receptionist with poor people skills may be costing you business and you might not even know it.
Like a slow leak in a tire, your small business may be losing money and you just can’t figure out where. That’s probably because you’re not being methodical enough in your accounting, and figuring out what each job, order, or client is costing you in real dollars. Without the proper bookkeeping and accounting practices in place, it will be much harder to determine which projects are making or losing money. And if you don’t know these critical details, then it will become increasingly difficult to figure out how to adjust your practices and focus on revenue-generating initiatives.
Not Accounting for Time
Maybe part of why sitting in traffic is so maddening is because you realize the money you’re losing while you inch along instead of working on your small business’ initiatives. And if that’s you, then you already know this one. But the time you take to do little stuff –like meeting with vendors you know you won’t use or going to seminars that aren’t useful – take away from income you could be bringing in to your business. So factor in the cost of lost time when making any scheduling decisions.
Kind of like a car salesman convinces you that you need calfskin interior and xenon headlights, web developers will often tell you that your small business needs a lot of website features that it just doesn’t. If you’re not selling much online, CIA-level security for your business’ website isn’t necessary. Heck, depending on your business model, a shopping cart may not even be necessary. Think long and hard about what function you want your website to have and which digital marketing tools make sense for your business, and spend only what you need.
Search Engine Optimization
Along the same lines, search engine optimization (SEO) is important if your business is web-based or largely dependent on Internet sales. Everyone wants to be found online but if you’re an auto repair shop or a corner bakery, spending thousands to enhance the SEO of your business website isn’t going to get you much ROI. Remember: These buzzwords you hear are fun, but they don’t always apply to you.
Using the Same Bank Account
We told you before that you absolutely should not, ever, mix your personal and business funds. But people don’t listen, so we’re going to tell you again: Don’t ever mix your personal and business accounts! This is one of the fastest ways to make your business lose money, and makes fixing the problems nearly impossible since you don’t really know where money is going or coming from.
Pricing Your Products or Services
You may not want to hear this, but there is a slight chance that you’re overcharging for your products or services. You may also be undercharging. Either way, your pricing may be losing you money, and you can solve this by incorporating two different pricing strategies: Cost-based pricing, where you determine all the costs involved and price according to profit you need to make, or value-based pricing, where you determine the value to your customer, charge slightly less than that, and adjust costs accordingly.
Paying Employees When Outsourcing is Cheaper
It might make you feel all warm and fuzzy inside to provide a steady income to your employees, but the feeling gets cold real quick when you can’t afford to turn on the lights. With many things, like copywriting, social media, marketing and cleaning, it may be far more cost effective to outsource on an as-needed basis.
Taking the time to negotiate with vendors might seem like a hassle when you’ve got 28 hours worth of things to fit into a 24-hour day. But that is time worth taking, as the price you’re quoted isn’t always the best price, and a lot of vendors will work with you rather than lose your business. Putting the extra bit of effort to negotiate pricing with vendors early on will pay huge dividends over the long run.
Your Business Lease
If you’ve been a good tenant, see if you can renegotiate your business lease to save some money there. Commercial landlords, just like vendors, won’t make money off open space. And if you’re in an area where they won’t be able to rent your space out immediately, you may be able to get some breaks on your business lease just to keep you there.
Do you really need office space in the first place? You may need some kind of storefront to meet with clients and have a designated work area. But if all your employees don’t need to be there all the time, don’t spend money on the square footage of having them there. Embrace telecommuting. It saves money and keeps employees happy.
While it may be easy to keep one account with one shipper, it’s is rarely ever the most cost effective. Rates fluctuate more than you think, and taking the time to check as often as weekly as to who can offer you the best deal can save you hundreds per month. Thousands if your small business ships products regularly.
Though some might question the logic of buying 20lb bags of pretzels and entire crates of frozen pizza, there is some logic to buying in bulk. So when purchasing things like office supplies or other non-perishable goods, doing it at a discount club like Costco may be a lot cheaper than buying at Staples.
That said, sometimes your business is just in a cash crunch. And while eliminating costs in these areas we talked about can help, it won’t always solve the problem. If you need some extra working capital, then a small business loan from BFS Capital may be a great way for you to grow your business while cutting costs as outlined above.
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