You can look at many businesses and revel at their success. There are plenty of companies that have gone from something small to something substantial in just a few years, and this is enough to admire for any budding entrepreneur.
However, even the most successful businesses are guilty of wasting money. Yes, there is that saying of spending money to make money, but spending too much money is not a smart business plan. There are even areas where businesses don’t realize they are burning through money, meaning they never live up to their potential.
But where are these areas? There are so many elements within a single company – even a small business – that it can be difficult to identify the most significant money drains. Here are the top twelve areas where businesses burn through money.
Outsourcing In Too Many Areas
Outsourcing is a fantastic way to get the same type of service for a fraction of the price, and many businesses use it for payroll, web design and maintenance, and even content creation. However, these services can be cheaper than hiring a full-blown department, relying on too many means you aren’t really running your business.
Furthermore, there are plenty of outsourced tasks that you can do easily yourself, and the personal touch (and the touch of your employees) will make any activity more authentic. This will appeal to customers and clients, who may be able to spot when something has been outsourced compared to created in-house.
Outsourcing In Too Few Areas
On the other hand, some businesses will not outsource enough. They prefer to be in control of everything and are reluctant to loosen the reins and trust other people to do simple tasks. These simple tasks waste time, energy, and resources, and you could be focusing on something else rather than concerning yourself with minor details.
This applies to marketing projects as much as it does to work out any employee (or ex-employee) benefits. Considering the high turnover of the past few years many businesses have opted to outsource claims management so you don’t waste money, which is an area that companies should leave to another team, rather than add to the ever-growing pile.
Using Tech That’s Beyond Your Needs
There is a subset of burgeoning companies that want to be the next Jobs, Zuckerberg, or Musk, and they believe the only way to test them is by making their business stand out as a tech haven.
However, investing in the latest technology and systems for your company may be the best idea. For one, many companies do not need it, as they do not have the computers sophisticated enough to run it. What’s more, other businesses aren’t using this tech, and many examples require both parties to use it to reap the benefits. It’s best to keep using what you need and only upgrading if things start slowing down.
Failing to Follow Up
Successful business owners will tell you they built their company thanks to the loyalty of their customers, and many of these customers have been there since the very beginning. Building customer loyalty is exceptionally important in any era, and it is a fantastic way to increase business sales without requiring substantial marketing.
You should also follow up with customers after a sale to gauge their experience. Surveys and feedback will help you become the best business you can be, and you can take advice on board and implement changes, which will bring more customers to your company.
Marketing To the Wrong People
Every business has a target audience. These are the people you imagine when you think of anybody using your product or service, and you believe you know more about them than they do about themselves.
There is a chance, however, that you’re still missing the mark and spending the marketing budget on fruitless leads. If you aren’t getting the engagement you hoped for, go back to square one and consider whether this campaign (as well as the channels it launched on) is appropriate for the target market. Your research should show the most appropriate areas to focus on, so put your energy towards this.
Failing to Keep An Eye on Expenses
It should come as no surprise that failing to track your expenses is one of the most significant causes of burning through money, yet many companies are still guilty of this. No company has infinite funds regardless of investments, and this money will run out if you are not careful.
Tracking business expenses will reduce the risk of spending too much on client dinners or investing in new technology. It will also save you substantial tax bills and charges when it comes to filing information. If you don’t know where the money has gone, you may not be able to justify it as a business expense, and this can put the company at risk.
Employing Too Many People
Even the smallest businesses have an extra set of hands to help around the store, office, or warehouse, but you should ask yourself whether you are hiring because you need to, or because you are trying to reduce workload as much as possible.
Whether you have a team of 2, twenty, or two hundred, you should be careful when hiring another person to join the team. Too many businesses employ people for the sake of it, and this can reduce everyone’s workload and responsibilities. This means many will stand around doing nothing, but you’ll still have to pay them because they were on the clock. Would you pay yourself for doing nothing? The same rules apply to your team.
Making the Wrong Decision
Nobody is perfect. You are going to make a mistake or a misstep here and there, and that’s okay. However, making too many wrong decisions can waste your company hundreds, if not thousands.
You should never feel bad for making a mistake once, but you should make sure you learn from this mistake so you never make it again. When faced with a problem, carefully consider all possibilities and do not just opt for the easiest option. It’s important to think seriously about what could happen and go from there. If you need help, don’t resist reaching out to mentors.
Treating Yourself Too Often
It’s nice to be the boss, but the boss can take liberties far too easily. Although there are some things you need, such as a suit or professional attire to look the part, and perhaps even an upgraded vehicle. However, this is where you should draw the line.
You don’t need all the fancy equipment you think you do, and if you fall into the trap of impulse buys because you’ve read one-too-many rapid success blogs, you put your company at risk before it has even gotten off the ground. What are you going to do with all those fancy treats then?
Purchasing Things You Need to Build Naturally
A lot of businesses rely on paid-for likes, followers, and comments on social media to make them seem like a bigger deal than they are. This boosts their profile and helps them trend or go viral. While it’s good to get your name out there, this success is often built on foundations of sand.
Paid-for engagement is not engagement, and it will dry up sooner rather than later because buying more and more is not sustainable. Furthermore, while you may be the most followed account on Instagram, your actual customer base is minute, and no one has any genuine interest in your service. You need to let these following grow naturally.
Buying Before You’re Ready
There are plenty of examples of business advice that demand you prepare for growth as soon as possible. However, if you’re upgrading systems and server space or looking for a larger office, while you only have several employees, you are doing it wrong.
There’s no point doing any of this if your company is not about to take the next step. While you should always be ready for your company to become successful, thinking too far ahead means y6ou will miss what’s right in front of you. In doing this, you might miss your chance to grow altogether.
Taking Out Loans
It’s accepted that loans can help businesses, and many startups rely on them for launch. However, the risks of taking out a loan are always there, and too many businesses will immediately go the loan route.
This impulsive decision can backfire if they are not careful. These loans will accumulate interest as time goes on, and you may struggle to pay them back if the business is not a success. Repayment will always hang over your head until you have paid it off in full, and this could cause unnecessary anxiety around your company.
Don’t Let It Burn
Many things can help a business succeed, but too many budding business owners fall into the trap of thinking they need them now without considering how it could affect the budget and the workplace balance. While it’s tempting to take advantage of the largest tech or give your company a leg-up in the industry, these things only provide short-term positives. Too much spending too early can put your company at risk, so be cautious.