Robert Codray, Negosentro | Running a business isn’t easy by any stretch of the imagination. In fact, it’s so difficult that only four percent of companies manage to survive past the ten year mark.
There are many reasons why businesses fail. However, more often than not, it boils down to a budget that just doesn’t work. Costs exceed revenues, and this ultimately leads to bankruptcy. Overall, you need to understand how to lower your costs. With that in mind, here are some common business money pits you must be sure to avoid.Office Space
While office work must be completed to run a business properly and to ensure that it conforms to the law, there is no rule regarding what that office space has to entail. Renting office space can certainly create a significant drain on your finances. In a major city, rent for office space can cost as much as $5,000 per month. That can be more than what many businesses can afford.
If you run a small business, make do with what you have. If you have to have a smaller office inside your own store, do so. Even a home office may be a good alternative. You can of course deduct some of the expenses of a home office from your income taxes.
Something else that can be a real money pit is traditional advertising. Traditional advertising of course refers to things like print ads in newspapers and magazines, TV commercials and radio ads. While everyone is very familiar with these, you should be aware that they are dominated by humongous corporations for a reason. These kinds of ads are very expensive. A TV ad ran during the early evening can cost as much as $2,000 per airing. Even worse, there is no guarantee the ads will reach the actual demographics you are targeting.
Instead, you may want to consider a switch to digital advertising. Advertising on the internet through platforms like Google AdWords is certainly far more cost effective than traditional advertising choices. Better yet, certain online advertising platforms allow you to only pay when a viewer of the ad takes substantive action such as clicking on a link. You’ll also be able to track the ads. This way, you’ll know how many people from where are viewing the ad. This is impossible with traditional choices like print, radio and TV advertisements.
One thing that is almost always discussed as a cost cutting measure is outsourcing. However, you need to realize the context those statements are usually made in. Often, they refer to huge companies with massive overhead. In that scenario, outsourcing can indeed save money as opposed to having to open a department in-house to handle those tasks. However, this does not necessarily refer to small businesses. In the case of a small business, outsourcing can actually be a bigger drain on finances than not outsourcing.
Thankfully, there are alternatives to both outsourcing and hiring a lot of new employees to handle these kinds of tasks. Software can help streamline many tasks to the point they don’t require as much attention. For example, inventory control software can digitize many of the same tasks that would once need to be performed by people. You can keep close tabs on what you have in stock without having to pay for as many routine inventory checks performed by human beings as you would without the software.
Accounting software can also help to simplify managing your books to the point you won’t have as much of a need for hiring an accountant. Investigate different software packages and apps that can help you perform the kind of work that is typically outsourced.
Web development vs software development is another question you may deal with. However, you don’t have to hire a developer to get a hold of a custom website or software application. Many webhosts offer website templates that can be easily modified without technical knowledge. There are also simplified app development tools that you can use without knowing how to write code.
Running a business is difficult. One of the most difficult aspects is making sure you stay in the black. To accomplish this, you need to do a good job managing your costs in an efficient manner. Avoiding certain business money pits such as rent for office space, traditional advertising and outsourcing can help make your budget learner and more effective.