Whether it is a small or medium scale business you operate, there are several loopholes, some blatantly obvious, others more subtle, which present themselves in form of ways businesses waste money.
As a new entrant into the world of business, green and inexperienced business people are susceptible to the pitfall that is pouring resources, both tangible and intangible, into largely unnecessary areas.
Small irrelevant expenses are what could push a business over the hill from profit to loss, as such, it is very imperative they are carefully and constantly studied, analyzed and avoided. If you find yourself guilty of any of the below-listed ways businesses waste money, then you must take the appropriate action to get back on the right path while there is still time. Here are some of the ways businesses waste money that can be duly avoided.
1.Using Unnecessary High-level Technology
One of the common ways businesses waste money, is when they decide to buy all the latest, brand new technology, despite not having any apparent need for them. The world is dynamic and new technologies are on the spring on a regular basis. They are so powerful, quick and can do so many brilliant things that nothing else can. While this is a wonderful prospect, it is not great altogether when you won’t actually be needing the extra speed and amazing additions at the current phase of your business cycle.
To avoid this component of the ways businesses waste money, you must learn to stick to what you’re actually going to be needing right now. When you experience growth which then translate to more technological need, you could then decide to go for advanced tech, but for now, expunge that thirst for sophistication and do what is proper to avoid huge holes in your budget.
Another constituent of the ways businesses waste money is through the application of a wrong marketing strategy. Marketing is a very difficult thing to master. While serving as a huge determinant of the success or failure of a business, marketing could be really tricky, risky as well as time and resource-wasting. I have already expounded on some of the mistakes apparent in digital marketing, however, marketing does not necessarily have to be done through digital means only.
Naturally, people new to business are inclined to believe that the more money spent means more leads generation and conversion, sales and profit. Sadly, however, this is not the case. The choice of a marketing strategy to adopt depends on the type of product you are selling, your target market and the available budget. The target audience is very vital among these determinants and you must have a proper and detailed knowledge of them to ensure you are not spending thousands of naira placing your goods and services in front of the wrong people.
Now, this, here, is actually one of the essential ways businesses waste money that is actually underrated and disregarded. The most important part of going into a business is budgeting: clearly outlining what and what will actually be eating from your cash reserves and how incoming revenue will be appropriated. The poor tracking of expenses is definitely one of the common ways businesses waste money and you as a nascent businessperson will do well to recognize this pitfall and make possible ameliorations.
Money is definitely meant to be spent, but when it continues to go unnoticed, your cash flow gets out of sync, over-expenditure occurs and soon you are spending way above your reasonable limits. You must record all of your expenses, whether small or large, in order to know on what part of the scale you are on. Effective budgeting translates to good record keeping and is a huge factor determining the growth rate and survival of a business.
4.Hiring More Staff Than Needed
Yet another of the common ways businesses waste money is through their hiring strategy. You do not have to hire personnel for the sake of it. Some businesses have managers for every small area and this wrong, especially for a startup or newly formed small business. Having a staff strength that rivals Apple is not advisable for an organization that has just one office or that is operating from a single location.
Most times, for new businesses, the onus falls, not on the number of workers, but on the skill sets possessed by the relevant few.
Roles could be merged into one, especially when they are too similar and simple. This is why I continue to belabor the crucial point of employing workers who share your goal, vision and ambition and are willing to go the extra mile. The process starts with you: do not dwell on quantity, dwell on quality.
This particular subject makes the list of common ways businesses waste money because of its sensitive nature. While not wasting money outrightly, taking a loan, especially when not necessary might just be one way of planning for disaster. Many startups can’t operate without acquiring a loan, which is very much understandable. I have written earlier on how loans serve as a source of funding for businesses as well as given tips for securing bank loans.
However, the realization that it’s become common nature for businesses to think they always need a loan just to get started is as baffling as the thought itself, reason because it is totally wrong. Loans, while requiring a lot of strenuous paperwork and rigorous processes, mean a lot of interest, and they also mean that in many cases, if things do not go as planned, then you are in a precarious situation.
Bootstrapping, which is the usage of personal funds to start small businesses, was my first recommended option for funding a business. Acquiring a loan should only take relevance when personal savings are not enough to deliver on your business ambitions.
But even then, you must be well-prepared and convinced about your ability to deliver on your loan promises, else you end up running into debt, signalling a start to the end of your business.
Can you identify the common ways businesses waste money now?
First is the mistake of using unnecessarily advanced and expensive technology. Then there is the bit of applying a poor marketing strategy. There is also the area of poor budgeting, hiring more staff than necessary as well as traversing the thorny paths that is taking a loan.
The ways are not limited to these, however. businesses must also guard against making purchases well ahead of time, purchases which might eventually turn out redundant.
They must also be wary of the propensity to buy, rather than build, network of customers. You can only buy numbers, you can not buy loyalty. Finally, and not in any way less important, is poor decision making.
Your business decisions are vital to the existence of your business, As such, before appending your signature or giving an approval to any crucial idea or concept initiation, you must gauge its implications carefully.* ADS**
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