Studies show that most businesses fail within the first five years, and this is typically due to a lack of capital. A common mistake that many business owners make is spending too much to run their business.
Your ability to manage your expenses while simultaneously providing quality products or services will determine your success or failure as an entrepreneur. Below are the 4 best ways for business owners to slash their operating expenses:
1. Use the right software, from business processing to payroll
Businesses of today need technology such as computers, software, and access to the Internet. The typical business will need software for word processing, spreadsheets, presentations, and payroll. For the latter, look into ADP employment tax & compliance services to make sure your in-house payroll is being properly managed.
It’s easy to spend far too much money on the technology your business requires to keep everything running smoothly. Often, buying straight off the shelves is done in a last-minute panic by business managers who who attempt to purchase what they perceive is the best technology out there, leading to excessive costs.
A way to prevent this, is to make sure to take the time and research what technology will fit your business needs. Knowing what your buying ahead of time will save you a great deal of money and time.
Payroll software is particularly important for the modern day business. Not only is it cost effective when you get it from the right source, it also offers an effective calendar that is great for managing absences, overtime and sick-leave.
You can create pay slips with ease, set reminders to complete important tasks, and even introduce a new level of office security into your internal systems.
2. Hire for attitude, train for skill
One of the single greatest expenses that most businesses will have is their employees. You can’t build a great company without great people. And sometimes if it means hiring people without the right experience, but with the ability to learn fast and adjust, then go for it.
Those building a business on a low budget should consider on-the-job- training, hiring those that lack degrees but who have the skills or aptitudes to quickly learn the job. Sometimes employees will have a degree, but not much work experience.
A friend of mine who got his degree in Electrical Engineering is in this situation. Though he graduated, he chose to travel to Asia instead of immediately finding an engineering job, and by the time he returned to the United States, few engineering companies would hire him because he didn’t have enough work experience.
He has all the skills and knowledge needed to be an engineer; but because he has no experience, he has been forced to start his own business.
People like him, who have degrees but not much work experience, will often work for less, and are extremely valuable for startup companies.
3. Don’t be afraid to barter
Bartering has existed for thousands of years because it works. Even if it seems archaic or beneath you, it can be excellent for startup businesses that are low on cash. If you need a product or service, and you don’t have the cash to pay for it out of pocket, you can sometimes acquire it by offering a service or good in return.
For example, if you’re terrific at programming, but you’re low on cash, you could find someone who needs a custom application built, and then make a deal offering to trade your coding services in exchange for a percentage of the profits the software generates when its launched.
4. Learn the difference between value and price
Many business owners are penny wise but pound foolish. They think the key to success is spending as little as possible on everything. The problem with this mentality is that sooner or later it backfires, because cheap and misguided business owners often spend less in the short term but more over the long term.
Just watch the goatee sporting immoral and asinine father on Bering Sea Gold on Discovery Channel. He goes the cheapest route every time and then wonders why he rarely recovers any gold and why his sons despise him so much.
A classic example of this is the cheap landlord who refuses to fix a problem in their tenant’s apartment, performing minor repairs that only solve the problem temporarily, and when the tenant gets injured, they sue the landlord who is then forced to spend more money than they would have spent if they had simply spent the amount necessary to fix the problem. Price is what you spend, value is what you get. Any business owner that wants to succeed had better learn the difference.