Five lessons I’ve learned to help control my small business expenses
When small business owners start out, they typically have a few primary revenue goals in their sights and get very clear about the money they want to make. But very few are focused early on controlling expenses. Last year, I did a consulting call with a small business coach who touted that she ran a “multiple-six-figure” business. That was impressive to me (she was a solo entrepreneur) and I invested in a few coaching sessions. Just one session in, however, I learned that while she did in fact making upwards of $300,000, she also had expenses that meant she was bringing home a very small percentage of that number in net revenue. It was an early lesson for me — revenue is just one side of the equation.
Whether you’re just starting out in business or you’ve decided it’s time to take a closer look at your finances, controlling expenses is a huge factor in running a sustainable business. Here are a few lessons I’ve learned along the way.
Track Your Finances Closely and Know Where Your Money is Going
There are many small business owners who don’t track their finances closely and end up with a business model that’s just not sustainable. If you are stuck in a rut, losing control of debts, and feel as though you never have any money, you need to find a solution quickly. And, before you can start to figure out how you can spend more wisely, you need to have an understanding of where your money is actually going.
First, ensure you are closely tracking your income and expenses and sticking to a budget that has been aligned with your goals. Once you know exactly where your money is going, you can start to look for more opportunities of where it could be spent more effectively Specifically, you’ll want to dive in by category and do a comprehensive audit. Pay special attention to:
Look at all your income; wages, benefits, etc.
Look at all of your expenses; everything from your morning coffee, to your mortgage payments, and all those subscriptions!
Then, create a budget that you can stick to. Be realistic about what you expect to make and spend in the next several months.
If the budget isn’t balancing out, look at places where you may be overspending and do some comparison shopping to find alternatives that offer the same or comparable features at a lower cost.
Decide on how much you are going to save every month and make saving a priority.
If you use bitcoin, research the companies that accept Bitcoin as payments and keep track of your spending here too.
Think About Benefits And Drawbacks Of Your Purchases
There are far too many purchases that fall into the category of impulse decisions. This may be fine for an occasional splurge after landing a big client, but it can become a huge problem for larger purchases or those that happen way too often. (Another $10/month subscription? Think twice!) Before you buy anything, think about how it will affect you in the future.
How long will this product or service last?
Do I have the cash in hand to purchase or is this an additional debt? (Be sure to factor in high APR rates if you’re going the credit route)
What is the future value of the product? If I buy this now, how it will serve my business?
Is the value worth the lifetime cost?
These types of questions are great when you are trying to decide if a purchase is necessary or you’re just chasing a shiny new object.
Don’t Worry About Keeping Up With Everyone Else
Many business owners get into financial trouble when they think they need to have all the latest technology, tools, and perks they see other businesses enjoying. The truth is - your business is unique and what you need can be very different from what others need. Instead of looking around wanting to have the latest and greatest tools, decide that you’ll only invest in the products and services that serve your greater purpose and have long-term value for your business or clients.
Discover Habits That Drain Your Budget
When you first start to track your finances, you’ll likely notice that you’re spending tends to fall into a few major categories (for me, it’s those dang take-out lunches!). Once you have discovered and identified which habits are using up large portions of your income, you can then assess whether or not these habits are really necessary.
It also helps to remember your long-term financial goals here, also. If you love to travel and spend the holidays in new and exciting locations, it’s easier to turn down that weekly lunch outing in favor of saving for the next vacation!
Learn To Appreciate Savings Instead Of Purchases
Some people find saving money easy and are naturally good at it - they might even draw enjoyment from seeing their wealth grow. For others, their money is supposed to be spent and enjoyed at the moment it reaches their hands. Anything else feels as though it is a wasted opportunity.
If you find that you are in the second group of people, try to adopt a mentality that leads to you valuing your savings more than that next impulse purchase. In the end, money invested or money that you save is more likely to benefit your life than the money you spend on products or services that don’t offer long-term value.
Which one are you - a saver or a spender? How do you decide where to invest your hard-earned income? Tell me in the comments below!
Until next time,
Andrea
One Nine Design is a digital marketing company helping small businesses and nonprofits learn how to use their website and email list to grow their reach and make a bigger impact!