3 Common Small Business Spending Mistakes You Need to Avoid
In our last blog, we talked about some of the common mistakes small business make when it comes to cutting costs. Today, we’re going to dive into the other side of the spectrum, spending. It should come as no surprise that being fiscally responsible is of the utmost importance for the health and longevity of your small business. Overspending without properly planning long-term can halt your business before seeing what the future of your business even looks like.
Before we jump in, let’s take a look at some stats. This study comes from Industry Canada and really sets the stage for what the entrepreneurial environment has in store. Approximately 85% of new businesses survive one full year, while only 70% survive for two years, 60% for three and 51% for five years. Needless to say, the stats aren’t really on your side. Knowing this, let’s do everything in our power to keep our businesses healthy and that starts with making smart spending decisions.
3 Common Spending Mistakes
1. Over hiring
Having a dependable staff is great, having a dependable staff that burns a hole in your pocket…not so much. As a business scales up quickly, it becomes very tempting to hire quickly. It’s extremely attractive to the business owner as the onus of day to day tasks can more or less be taken off of their shoulders. All the benefits aside, employees are an expense and should be looked at as such.
2. Overspending on technology
In today’s fast-paced world being connected is of utmost importance. Some business owners take this too far and get carried away with fancy gadgets. At Evolocity, we are extremely invested in technology as our whole business revolves around it. (Check out our blog about how technology is changing the financing world here to learn more.) That being said we also understand the importance of being plugged in without being tied down. Every situation is different and what is important is finding the happy medium between not having capable tech and having tech that is lightyears ahead of what you need.
3. Overspending on a location
We touched on this discussion in our previous blog about the importance of finding a location for your business. There’s a lot of value in the perfect spot for your business and determining exactly how much that is worth is an extremely difficult task. Putting a small, family-owned retail store on Ste. Catherine in Montreal, Robson in Vancouver or Bloor in Toronto might not be the best idea. Once again, the key is finding a balance.
Tips on becoming more fiscally responsible
We have only begun to scratch the surface but we have done enough to show that there is a clear trend forming here. It’s all about being smart about your decisions and don’t overspend on nonessentials. When applying for a small business loan for example, it’s crucial to have a solid spending strategy already in place. A great way of staying on top of you budgeting decisions is by using some basic tools.
One of the least complicated ways to track your spending and borrowing is by recording it in an Excel spreadsheet. If you want more detailed entry options, you could opt for a software like QuickBooks. There are hundreds of options out there (many of them are free!) but keeping it simple is probably the best way to go here.
Remember, the goal is to make sure you can keep on top of your finances to ensure you’re spending smart. Stay tuned for more small business tips and insight in the Evolocity blog!