Money can be tight for small businesses, so it’s important to be savvy with spending.
The stats vary, but in general, 20% of small businesses fail in the first year, and about half don’t make it past three years.
Mistake 1: Not creating a budget (or creating one and not sticking to it)
Without a clear financial plan, it’s easy to overspend.
- Create a comprehensive budget with your fixed and variable expenses.
- Regularly review and adjust it as needed.
- Be realistic. Don’t underestimate your expenses or overestimate your revenue.
- Track your spending carefully. This will help you identify areas where you can cut back.
- Don’t be afraid to adjust your budget. Things change, so it’s important to be flexible.
- Get professional help if needed. A qualified accountant can help you create and manage a budget that’s specific to your business.
Mistake 2: Not negotiating with your vendors
Most vendors and suppliers are open to negotiation, so don’t feel like you’re being difficult. If you’re a decent client for them, they’ll want to build a relationship with you.
- Save money by building strong relationships with all your vendors, to get better deals.
- Explore discounts, bulk purchase options, and long-term contracts.
- Be prepared. Do your research and know what you’re willing to pay.
- Be confident. Don’t be afraid to walk away if you’re not getting a good deal.
- Be creative. Look for ways to add value to the relationship, like offering to pay up front or by introducing other clients.
Mistake 3: Wasteful marketing spending
Make sure whatever you spend on marketing is giving you a positive return – otherwise you should review it, change it, or ditch it. That’s the simple secret to cost-effective marketing.
- Analyse your marketing campaigns: track key metrics like website traffic, conversion rates, email open rates and sales. Know which channels are working best.
- Double down on the channels with the best results – that’s where you should focus your budget.
- Set clear goals for your marketing campaigns. What do you want to achieve with each campaign? Measure metrics that align with those goals.
- Target your audience carefully. Not all marketing channels and strategies are effective for all audiences. Make sure you’re targeting the right people with the right message.
- Test, measure and adjust. Don’t just throw money at different marketing initiatives and hope for the best. Test different channels, strategies, and messages to see what works best for your business.
Mistake 4: Overspending on office supplies
- Buy in bulk for the best discounts and deals.
- Use energy-efficient appliances to keep energy bills down.
- Get a smart meter to monitor and track your energy use.
- Streamline as much as possible – reduce manual tasks, invest in tech, and make sure your customer service is top notch.
- Train your teams thoroughly so they’re making the most of your software and tools.
- Regularly review financial statements, expenses, and identify areas where you can cut costs.
Mistake 5: Not planning for the worst
Don’t hope for the best – plan for the worst.
Make sure you’ve got an emergency fund to cover unplanned expenses – like equipment breakdowns or unexpected drops in revenue. If you don’t have a safety net, it could put your business at risk – as well as adding stress and strain to you personally.
Mistake 6: Having only one main source of income
Get an extra safety net by diversifying your income. This could be other businesses or simply diversifying the products and services you already offer.
There are more and more multi-income individuals in the UK – people who earn their money from lots of different sources. This gives a huge amount of financial security and helps people achieve their goals. Intrigued? Find out more in this report by Utility Warehouse about the 20 million people already making money from several sources.
One example of this is to become a UW Partner – they get paid for introducing new customers to UW, a utilities company in the UK. You can work as much or as little as you like, making it fit around your free time and lifestyle.
A quick summary
Small businesses can make lots of spending mistakes that hurt their finances and growth. Avoid these traps and set yourself up for success with fantastic financial practices.
- Track your spending carefully. This will help you identify areas where you can cut back.
- Create a budget and stick to it. This will help you avoid overspending.
- Negotiate with vendors. You may be able to get better deals on essential supplies and services.
- Be mindful of your marketing spending. Invest in marketing campaigns that generate results.
- Plan for taxes. Use an accountant to develop a tax-efficient strategy for your business.
- Review your financial strategies regularly and be flexible enough to adapt to the market. This will help you keep your business financially healthy and competitive.
