Whenever a new business is started, or has even been going for a few years, there are many ways in which the businesses waste money.
Sometimes it’s on little things, but other times a lot of money is being wasted when it could easily be avoided, and the owners should know better.
Small unneeded expenses are what could push a business over the edge from profit to loss, so they need to be carefully looked at, and constantly monitored.
10 Ways Businesses Waste Money
There are millions of little ways that businesses waste money, but I’ve taken what are believed to be the 10 most common ways that a business will waste their money.
1. Outsourcing Too Many Tasks
There are far too many tasks to be completed within a business, that people believe need to be outsourced, because they’re too glorified to be undertaken by the business itself.
There are, to a certain degree, a number to tasks that do need to be outsourced, due to the complexity or just general nature of them. However, a lot of businesses may get carried away with the idea, and think to themselves that it makes things so much easier if they just outsource as many things as possible.
This is a classic example of how businesses waste money. Sure it makes things much easier, but it wastes so much money if the things being outsourced could be completed relatively easily by the business itself.
2. Using Better Technology than Needed
Another common way in which businesses waste money, is when they decide to buy all the latest, brand new technology.
It’s so powerful, so quick and can do amazing things that nothing else can. Which is great, however it’s not much good when you won’t actually be needing all this extra speed, and these amazing additions.
Stick to what you’re actually going to be needing.
You’ll probably find that it lasts for your business needs a lot longer than technology normally would for the average person. If your business grows and you NEED the upgrade, then go for it. At least then you’ll know it will be worth it.
However, if you’re just starting out as a business and you purchase technology on a way higher level than you actually need, huge holes will be blown through your budget and you’re likely to find yourself short of cash in other areas of the business.
3. Marketing Incorrectly
Marketing is a very difficult thing to master. It’s quite a risky aspect of business, which not everyone may realize at first. The normal conclusion for people new to marketing is that the more money spent means more leads, more sales and more profit.
This is definitely not the case, as the way you market your business all depends on the products you are selling, your target market and the budget you have at hand.
Certain types of marketing will be more effective for one business than another. Your target market may appear a lot more on one type of media than another.
So instead of going for the most expensive option, you need to work out which will be the most effective first. Then once you’ve figured this out, you can decide how much you want to invest.
4. Poor Tracking of Expenses
Actually, just the poor tracking of expenses is one of the common ways businesses waste money. Money gets spent, it goes unnoticed, so your cash flow becomes out of sync. Budgets can be tapped out before people realize and over-expenditure can occur.
I don’t need to tell you that that’s not a good thing.
Every small expensive can add up, and that’s why they all need to be recorded no matter how small, in order to ensure all calculations are correct and people are aware of what they have left to spend, how it will affect the business and so on.
5. More Staff than Needed
Some businesses have managers for every small area. This guy manages this team, and this guy manages that guy, then that guy reports to this guy… are you confused yet?
Keep it as simple as possible. If someones only having to do a very small amount of what they’re capable of, then it’s possible that some jobs could be merged into one role, which lowers costs and gives an employee the chance to perform at their full capacity.
6. Poor Decisions
Poor decisions in general can one of the most common ways businesses waste money. It doesn’t take much for someone to hit a dilemma, and once a person is faced with one, it can be very easy to make a wrong decision that costs the business a lot of money.
Therefore, it’s very important to assess the risks of each possible decision, and actually doing your research before deciding. A lot of businesses won’t really think these through, and end up burning a lot of money as a consequence.
7. Fancy Equipment
Similar to having fancy technology, purchasing fancy equipment when starting a new business is another potential waste of money.
You should only really purchase what you need when first starting a business. Any impulse purchases, that aren’t really needed will destroy your profits in no time at all.
8. Purchasing Things that Need to be Built Naturally
Sometimes, there’s no escaping the fact that certain parts of a business need to be built naturally, and not just bought.
I learned this when creating my first ever blog, which I ended up buying Facebook likes for, to try and get the ball rolling. Take a look at what I had to say on this crucial blogging mistake.
So as well as buying like for a Facebook page, there’s many other things businesses will purchase, that simply just need to be built naturally.
A lot of companies tend to buy and existing email list of proven buyers, but this is an absolutely terrible idea. That’s a classic reason why so many emails are claimed as spam.
Building things naturally does take longer, but it ensures high quality and trust within what you’re doing, which is crucial for running a successful business.
9. Premature Purchasing
Premature purchasing is when a business begins purchasing the things they need for growth, before actually being ready for it. It wouldn’t be so bad if the growth they were expecting occurred fairly soon after.
However, in most cases the business will make the purchases, the growth won’t come and the business will find that their cash flow is struggling to keep up with the expenses.
A good business should progress properly and buy and new equipment or space they need as and when they need it.
Many startups can’t operate without taking out a loan, which is understandable. But it’s become the common nature for businesses to think they need a loan just to get up and running and become successful, when in many cases this is not true.
If you can get away without borrowing money, even if you have to start off a little smaller than planned, then do so.
Loans mean a lot of interest, and they also mean that in many cases, if things go wrong you’re screwed. As Mark Cuban once said, “Only morons start a business on a loan.”