I’ve never met a small business owner who didn’t believe they were fiscally conservative when it came to running their business. Small business owners have to pinch every penny--it’s a matter of basic survival.
What an entrepreneur believes versus what’s really happening can be two very different realities. Expenses accumulate, and it’s easy to lose track of wasteful investments unless you’re keeping an eagle eye on the details along with the complete picture.
The key to fiscal responsibility is performing a regular audit of what you spend and challenging yourself as to whether a given expense is still effective. It’s a pain in the butt, but it’s true what they say: no pain, no gain.
A Call to Arms
Usually, small business owners make bad investments for one of two reasons. The first is that it’s is simply a poor decision, and doesn’t turn out like they expected. The second is that the needs of their business change, and what seemed smart at the beginning proves otherwise.
Either way, money is being wasted. Regular audits of the effectiveness of what you spend is the only way to stop the bleeding and ensure that your business stays healthy and strong.
A Modest Example
Let’s say you start a small business and think: “I’ve got to get my act together, financially speaking; therefore, I’m going to pay for a Quickbooks account.” And you sign up for one, and everything’s hunky-dory.
But is it? Can you justify paying $30 a month for Quickbooks when a free tool like Microsoft Excel would serve you just as well?
The difference between a fiscally conservative entrepreneur and a fiscally reckless one is that the former is able to answer the question within a month or two, while the latter lets it go for a year because $30 a month doesn’t seem like a big deal.
A fiscally conservative small business owner knows that a single wasted dollar is a big deal.
Three Lessons from Real Life
Let’s look at a few more ways that you might waste precious revenues without realizing it in the moment:
- At one of my former companies, we were paying heavy administrative fees for an employee benefit that 80% of my people said they wanted. This went on for a year. One day, I randomly decided to take a peek at how many of them were actually taking advantage of it.Out of 70 employees, the grand total was three (yours truly included). We poured lots of money into a program that sounded good on paper, but that no one actually utilized when push came to shove. If I’d done a simple audit within a month of implementing it, I’d have saved thousands of dollars.
- My first company, which I founded in Idaho, dealt in electric sign repair. I had maybe five competitors. The year was 2000--the olden days when people still used phone books. I saw that all of my rivals advertised in the Yellow Pages, so I signed a 12-month contract at a hefty monthly price to do the same.Luckily, I had just enough insight to list a phone Yellow Pages phone number that was different from my regular work phone number. That way, I could keep track of how much business actually came through the phone book.The results were underwhelming. I had a lucrative first year, but the Yellow Pages deal was a disaster. I paid around two thousand dollars a month for a service that brought me a few jobs at most.
It could have been far worse, however. If I hadn’t been tracking it, I might have assumed that my unexpected success was due in some part to my advertising in the phone book. Instead, as soon as my contract was up, I put the same money into hiring a salesman who produced actual results.
- At my current company, we provide free employee lunches. Originally, we rolled out the program because we noticed that a bunch of our people worked straight through lunch, and we wanted to thank them for the extra labor. Eventually, we saw that it was having a different effect--instead of working through lunch, employees were sitting down to enjoy the meal together. We decided that the social benefit was well worth the cost.But we still kept a close eye on the numbers. And when a bunch of our people signaled recently that a long-term solution would be very welcome, we looked there first to save money. It turned out that cutting three pricey restaurants from the weekly rotation would save us exactly enough to provide the new benefit without skipping a beat.
Regular audits of our expenses meant, in this case, that we could both have our cake and eat it, too. Staying on top of it cost time and effort, but it was a drop in the bucket compared to what we might have spent if we hadn’t had the discipline to routinely go over the books.
Keep in mind that fiscal responsibility isn’t something you master overnight. It’s a process--a journey, rather than a destination. I’ve been an entrepreneur for nearly 20 years, and I learn new lessons constantly. So stay close to those books; learn what’s working and what isn’t; make changes as necessary. Your future self--and your blooming business--will thank you.