How to Fix Your Poor Business Spending Habits
Running a startup can be both exciting and costly. It can be tempting to go all out and get the latest and greatest in gadgets for your startup, following the idea that you have to spend money to make money. While that’s entirely true to an extent, you need to know where the line is and refuse to cross it.
There are telling signs when someone’s spending is out of control, and the results can be disastrous. You must seek help if you are addicted to shopping and spending money on frivolous things. Here are a few signs that you’re in trouble, and how to fix your poor spending habits.
Scale Up Slowly
As a startup or small business, you want to plan for the future. You don’t, however, want to spend money with the idea that your future success will pay for it. Rather than purchasing with the future business in mind, consider what you need now to effectively deliver the promised goods or services to your customers.
For example, if you’re running a kayak tour company and hope to someday have four instructors running twenty kayaks at a time, you create a business plan to reflect that. You do not, however, purchase twenty kayaks right now. Instead, buy the five your solitary instructor will be able to manage and schedule accordingly. Once you have to start turning customers away, consider buying another batch of five kayaks.
The idea with scaling up is that you’re increasing your offering to meet demand, and spending only what you need to run a business today.
Know the Difference Between Wants and Needs
From an early age, we try to teach children the difference between wanting something and needing it. You want to go to your favorite band’s concert. You need to have money to pay rent. As an entrepreneur, it can be challenging to remember that important distinction.
Determine what your company needs rather than what you want. While it might be fun to have a high-powered laptop that costs $500 more than the base model, it might not be necessary to operate your business. You need a company vehicle to meet with clients. You want a Mercedes to impress them. Getting comfortable with being logical will help prevent poor business spending practices.
Budget, Budget, Budget
Set a budget for all aspects of your business and adhere to it. If you find yourself spending too much on lunch meetings, set a monthly limit in a sustainable budget. Sometimes having a number on paper can make it easier to track and remain aware of what you’re spending.
Set a total overall budget and reallocate funds as needed. If you spend too much on stationery one month, even if it’s a necessary expense, don’t use that as an excuse to go over budget. Instead, spend less on another area to make up for it and keep your expenditures balanced. If you carelessly go over budget once, it will be easier to do it the next time, until you have no budget at all.
Don’t Borrow too Much
Many startups and entrepreneurs get a business loan to get them on their feet, which is entirely acceptable. However, taking more money than you need can cause a temptation that’s difficult to ignore. It can give you the illusion of having more money to spend, and cause you to make bad decisions.
Nip this idea in the bud by borrowing only what you need, after creating a business plan and determining what seed money is required to get you up and running. Rather than using credit cards, look at programs that require more accountability– such as small business development lenders. If you need money desperately, look for short-term loans that are meant to bridge the gaps for a short amount of time.
Being a responsible spender will help bolster your success as a business owner. Too many would-be successful entrepreneurs have met their fate as a result of irresponsible borrowing and spending. Be smart, be savvy, and you’ll be successful.