As a new business owner, it’s hard to know which strategies will yield the best results. Even some seasoned entrepreneurs still rely on outdated business practices that provide little or no ROI. Some of these investments and methods may place an ongoing drain on finances, doing more harm than good.
That’s why it’s important for business owners to identify money-wasters and seek to spend smarter in the year ahead. Below, 11 members of Forbes Finance Council share some common items that can drain a business’ budget.
1. Software Spend That’s Not Tracked To Revenue Generation
The consumerization of enterprise has led to the many benefits of pay-as-you-go pricing for software. However, businesses often fail to plan for growth in these expenses, and ROI is ignored as priorities often hinge on optimizing revenue. Cost optimization and tracking ROI on software expenses by identifying causality to revenue and profitability must be a day-one priority for new business owners. – Abhinav Tiwari, Owl Capital Group
2. DIY Bookkeeping
One way many small businesses effectively waste money is by not having an independent bookkeeper. This may seem counterintuitive, but not having a bookkeeper or business manager can become a big “net” waste of money, as lots of potential savings and outdated practices go unaddressed due to lack of attention. – Joseph DiSanto, Play Louder
3. Slow Response To Customer Requests
Today, companies need to respond quickly to customer requests. Companies that are too slow to respond will lose customers. Amazon is changing our business culture, conditioning people to expect fast, detailed responses from the companies they use for solutions to their problems. An investment in technology may help. – Dave Sackett, ULVAC Technologies, Inc,
4. Unreliable Service Providers
New business owners give up margin across the value chain simply by not yet knowing how to assess reliable and solid suppliers, be it a point of sale terminal for credit card payments or even accounting and inventory management software. It takes time to optimize a new business. I would advise speaking with as many friends as possible who own small businesses to get solid footing at the outset. – James Hewitt, CEO, Advisor, Angel Investor
5. Office Space
Restaurants and other experience-based businesses need physical space to serve clients. But most knowledge-driven business models don’t require traditional office spaces to thrive. The Covid-19 shutdown is proving just how viable digital connectivity outside the office can be for collaboration and serving clients. – Brian Henderson, Whitnell
6. Keeping Too Many Services In House
One of the biggest sources of waste for a new business is not outsourcing as many services as possible. These days everything from IT to compliance, HR, and tax preparation and accounting can be outsourced for less than it costs to do them in house. Even renting a property can be “outsourced” to co-working spaces that manage everything for you and reduce hassle and stress. Keep your business lean and simple. – Guan Zhen Tan, Point Hope
7. Traditional Phone Systems
Traditional phone systems are astronomically expensive and tend to not work well with what is becoming the new way of doing business. There are several lower-cost internet phone systems that utilize apps or automatic cellphone forwarding. This lowers your team’s response time while catering to work-from-home or on-the-road employees. – Megan Lezar, QuadCap Wealth Management
8. Marketing Without A Strategy
Many new business owners waste money on advertising. Somebody comes along with a good idea, a flashy sales pitch and promises that are too good to be true. The business owner jumps on board but ends up seeing little to no ROI. Instead, business owners should strategically plan their marketing and ensure they’re targeting the right demographics to help grow the value of their business. – Justin Goodbread, Heritage Investors
9. Old-School Print Ads
Lots of business owners still spend on old-school must-haves such as the Yellow Pages and print ads. Instead, invest in building an online presence and digital advertising, which allows you to easily scale, reach a wider audience and achieve higher ROI. There’s no cookie-cutter answer as to where you should start, but continue investing in channels that already lead customers to you. – Joe Camberato, National Business Capital & Services
10. Company Swag
I have seen almost everyone overspend on marketing, especially giveaway items and internal items, which typically don’t generate revenue. Most clients and employees don’t care whether the shirt they receive is the Polo brand or generic. Pens, notepads and other items often are not used or are thrown away. Buy items people will actually use and keep if you feel compelled to hand something out. – Chris Tierney, Moore Colson CPAs and Advisors
11. Monthly Service Subscriptions
Subscriptions, subscriptions, subscriptions. Most new business owners are inundated with sales pitches to make operating the business easier: “Subscribe to this service to manage your calendar for $29.99 a month,” etc. All of these small fees add up, and they aren’t necessary. Evaluate subscriptions before signing on the dotted line to ensure that the service is truly beneficial to the business. – Kelly Shores, GCubed, Inc.