Want to grow your business? Small business owners must be in tune with their monthly budget, and how to cut costs when necessary. If you’re throwing money away on unnecessary expenses, or even worse, failing tactics, you’re easily stunting your growth. Keep an eye on monthly spend, and follow this seven budgeting tidbits.
1. Know how much you spend.
This might sound like silly advice, but you’d be surprised at how many small business owners just aren’t in tune with their budget. Sure, you might hire a professional who has a better idea of how to manage money, but don’t just throw them your bills and walk away. Of course, you don’t need to get down to the nitty gritty, but at the same time, be familiar with the basics. Know how much money you’re making, how much you’re spending, and project future income based on these two numbers.
2. When it come to local advertising, choose wisely.
For a small brick and mortar location, local advertising isn’t necessarily ineffective. But, when reviewing your initiatives, keep your customers in mind. If 20 somethings make up your target market, printing a newspaper ad might not necessarily be effective. Don’t steer clear of local advertising, but at the same time, don’t invest in methods that don’t appeal to your customers.
Think about the last time you received a glossy promotional material in the mail. Was it visually appealing? Absolutely. Did you keep it? Probably not. If you’re like most, you took one look, admired the design, and then threw it right in the trash. Chances are, you didn’t scan for contact info, or take any type of action as a result. On top of this, most glossy direct mail pieces cost a pretty penny. As a small business owner, it’s better to invest in methods that give you an immediate return.
3. “Just expense it!” is no longer an option.
As a small business owner or marketing manager, you’ve probably uttered this phrase more than a handful of times. Are you guilty of expensing personal transactions? At one point or another, you’ve probably expensed a lunch with a friend, or even worse an entire trip. Beyond tax fraud, this is a poor practice, as it cuts into your actual expense budget. If you’re expensing personal purchases, you’re taking money away from qualified business investments, which then limits the growth of your business.
4. Measure your ROI.
If you don’t know the effect of your efforts, then you need to put every single marketing campaign on pause. First things first, figure out the best way to track your data. For example, if you promote a 20% off coupon code, note how many customers claim this discount.
How do you measure your ROI? Simple. First, write down your initial investment. This includes all direct and indirect expenses. Next, jot down any profits collected from these efforts. Now, use this simple equation to find the return you’re getting on your investment.
Gross Sales or Profits – Initial Investment – Additional Expenses = Your Return on Investment
Now, if your ROI falls in the negative, you definitely have a problem.
5. Stop pimping out your office space.
Should you work to cultivate a comfortable and creative work atmosphere? Absolutely. But, at the same time, if you have one or two employees that knowingly take advantage, and demand $30 staplers, you have a problem. Shop smart. Remember, if you save a few dollars here and there, you can put that money towards growing your business. And, if business is growing, everyone will eventually be rewarded anyways.
6. Don’t let friends and family pressure you into making charitable donations.
You should always help those who have supported you from day one. At the same time, don’t let these people take advantage of your success. When it comes to charitable donations, pick one or two annual initiatives, and stick with them. Don’t sponsor 3 soccer teams, donate $1,000 to a scholarship fund, and back a local battle of the bands. Find initiatives that are important to you and your employees, then donate accordingly.
When approached by friends, family, or other local professionals, politely let them know that you would love to contribute, but your team has chosen to put money towards other initiatives this year. Don’t ever let people make you feel obligated to spend your hard earned money.
7. Always keep the long term growth of your business at the forefront.
When making decisions regarding your small business budget, think long term. For example, a marketing firm might try to sell you a $1,000/month service, and promise instant results, but think long and hard about taking this leap. Is this something you can actually afford long term? You want to pick initiatives that foster an incredible ROI and have lasting growth potential.
Follow these seven budgeting tips when making decisions for your small business. The more in tune you are with your spend, the quicker your business will grow.
Kristen Vanstrom is the Director of Content Management for Slicktext.com. Slick Text is a top text message marketing provider. They offer immediate and affordable mobile communication solutions for the small business owner.