Small business owners work hard to keep their businesses growing. But even the most conscientious entrepreneur can fall into bad money habits. It’s easy to stumble into these habits, and if you do, you may find your business in serious trouble. As my team and I help other small businesses grow, we sometimes notice mistakes they make and help our clients correct them. Nahla Davies writing for the website All Business offers advice on avoiding bad money habits in the first place. These are the three we think are most important.
1. Paying too much for office space
Davies writes, “There’s no reason to pay for a beautiful office park or other expensive office space if you and your employees won’t use it, especially if you’re just getting started. Don’t invest in tons of company rooms or even an entire building until your startup is well off the ground and turning a profit (or is at least on its way to projected success metrics).” This is especially true now when many workers are looking for jobs that allow for remote work. If you find you have too much space since the pandemic, see if you can negotiate your way out of a lease, or negotiate less rent.
2. Taking out too many loans
Next, be sure that you don’t take out too many business loans or use too many credit cards when paying for business expenses. While it’s true that any startup will have to take out some debt to pay for equipment, materials, and other essentials, taking out too many loans could eventually overwhelm your finances with interest payments.
Since most startups don’t turn a profit within the first two years of their existence, you’ll need to keep this in mind as you take on additional debt. At the very least, try only to take out loans that require repayment a couple of years in the future. That way, any cash flow can be used to pay off the most important debts ASAP without allowing your interest payments to skyrocket in the meantime.
3. Overspending on inessentials
“Inessentials” will vary from company to company, of course. But for many businesses, these include:
- Special amenities or perks for employees, like catered lunches.
- New uniforms every year as you refine your company’s aesthetic and style.
- Special workplace initiatives and programs.
- Free things for your company clients.
- Overzealous marketing campaigns—it’s better to have a small but targeted marketing campaign than spend tons of money on inessential ads that saturate the market. You can usually avoid this by considering what you spend carefully.
We have one more piece of advice: Don’t “waste” your time on everyday tasks that you should outsource. You want to spend your time growing your business, not on time-consuming activities like bookkeeping or admin work. At VersaTel Solutions we have experts that can take those items off your plate. Reach out to us and we’ll develop a package that will help make your life easier, and your business more profitable.