It takes money to make money, but the ultimate goal of any business is to earn more than it spends. If your business is making sales but making little or no profit, you may be losing money.
Fortunately, you don’t need to rebuild your entire business model, you just need to find the cash holes and do some patchwork. First, take a look at your financial statements:
- Statement of cash flows
- Balance sheet
- Income statement
These financial documents can help you quickly identify weak points that require your attention. However, as any plumber or mechanic can attest, it is not always easy to find the leaks, even if you know they are there. somewhere.
While it may take work to reduce weight, identifying and eliminating unnecessary expenses will help you bolster your bottom line and better position you to be approved for growth capital, such as a SBA loan.
Below, we’ll share 4 common money leaks that most businesses encounter at one point or another and (more importantly) how to fix them.
4 common money leaks that hurt your bottom line
1. Unnecessary advertising
While any ad can be good (questionable) publicity, your budget is limited. You need to spend your marketing dollars on the channels that generate the highest ROI.
Focus on the channels you can follow. It’s difficult – and somewhat impossible – to attribute revenue to advertising media like billboards, conference sponsorships, or influencer marketing. No matter how much money you spend on these advertising media, you will never know for sure how much ROI they are responsible for generating.
Instead, consider spending most of your marketing budget on trackable advertising. It’s simple and easy to measure views, clicks, bids, traffic and ROI on the following channels:
- PPC ads (pay-per-click)
- Email campaigns
- Social media marketing
- SEO (search engine optimization)
- Content Marketing
Now, that doesn’t mean you should never use traditional marketing methods – we’re not saying that at all. However, if you’re on a budget, it’s best to focus on channels that deliver quick and clear results. These traceable channels will allow you to effectively scale effective channels or remove ineffective ads before you run out of money.
2. Unused software
Whether you are a solo entrepreneur or managing a growing team, you are bound to accumulate a variety of software solutions. You will likely have accounting tools, marketing software, payroll solutions, engineering applications, analytics, and more. These license costs start to add up, especially when you pay for the ones you don’t even use.
Perform regular audits to account for all the software your business pays for and uses. Make sure there is an internal and external point of contact for each software solution. Check with owners and users of the software to make sure they still see the value of the tools.
Stay up to date on new technologies to ensure you are using the best tools at the best prices. Don’t be afraid to explore and demonstrate new products, it may allow you to renegotiate contracts in the future or move to a more relevant solution.
If possible, turn off automatic renewal of annual licenses. Having to manually renew your license each year will require you to re-evaluate the software before spending your money.
3. Miscellaneous minor expenses
A corporate lunch here, a new desktop device there, a surprise giveaway, and an offsite team bonding event – the small expenses every now and then may seem like a little insignificant, but those tiny costs can add up quickly. .
You don’t need to cut back on all of your miscellaneous expenses – these are often big team building and morale benefits. However, you have to follow them. Plan for these expenses and try to stay within your constraints.
Regularly review your spending at the end of the month and quarter to see what can be cut. Create company policies on how teams can (and should) use their budgets. This will help make sure that you are spending your hard earned money on what matters most.
4. Sloppy time management
Time is your most valuable asset, and it is also most businesses’ worst cash drain. Sloppy time management is less about employees taking too many breaks from YouTube and more about faulty corporate culture. A culture of wasting time is marked by a few telltale signs:
- Lots of long meetings for what could have been communicated via Slack message or email
- Long and inefficient processes for process reasons
- Shuttle bus (fun fact: commuters spend an average of 408 days of their lives commuting to work)
- Frequent training and surveys required
Create a culture of time management by communicating (and proving) the value of your employees’ time. Consider starting Friday without a meeting or working from home Wednesdays. Set the Google Calendar default meeting time to 15 minutes instead of 30. Tiny time hacks like these can save minutes throughout the day, hours throughout the week and hours. days throughout the year.
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