Every small business should have its finances in order with the aim of saving as much money as possible. The more money you save, the wider your profit margins can be. In fact, a lot of small companies fail within the first few years because they go way over budget. They spend too much money, making it impossible to make any. The sales figures might be decent, but they’re not regaining their net spend – let alone surpassing it.
Why does this happen? Well, we can point the finger at any number of potential causes of excess spending in a small business. However, when you look at most businesses, there is a common theme that explains why spending can be so crazy. Effectively, companies are spending too much money on the same things. What this means is that you purchase something, then have to re-purchase it again in a few weeks or months – or even years. It’s a serious problem as you are constantly spending money on things over and over again.
What’s the solution to this? It’s simple, you can unlock the secret to saving money in your small business by considering longevity. When you buy something, anything, think about how long it will last. If you buy things that will last a long time, you will save money in the long run. To explain this point in more detail, let’s look at a few examples of what this looks like in the business world.
An office business wasting money on printer ink
This is a common concern in many offices. You need a printer to print out documents or marketing materials, but you keep running out of ink. Every month, you’re buying more and more cartridges for your printer. It’s a costly process, but you assume that it’s the only thing you can do.
On the contrary, money could be saved by getting a laser printer over a traditional inkjet one. While laser printers have an initial cost that’s higher than inkjet ones, they last much longer. You can get more prints out of them before you need to replace the toner. So, in the long run, you can cut the cost of printing and reduce your office overheads.
A handyman business wasting money on equipment
You can also apply this to carpentry businesses – or any business that involves using tools and making or repairing things. What tends to happen is you look for the cheapest tools available, but this is a problem. In a few weeks or months, the tools could break and need to be replaced.
A highly common issue is when businesses like these purchase cheap cutting mats. They use these mats to protect surfaces when cutting objects, but they get damaged and break after a few uses. So, they keep on buying them. In reality, money can be saved by investing in self-healing bench cutting mats that can take a beating. They last much longer, so money gets saved. The same goes for any equipment used in a business like this; invest money in higher-quality options as they will last longer before breaking and needing to be repaired or replaced.
A retail business not buying enough stock
The last example is one we see time and time again. Retail businesses try to save money by buying low amounts of stock. The problem is that this stock sells out, so they have to keep ordering more. Making multiple orders from a supplier will almost always be more expensive than putting a bigger order in at the start. Usually, the larger the order, the bigger the discount you’ll get.
If you run a retail business, pay attention to stock levels and customers’ buying habits. If certain items always sell out very quickly, increase the order quantity. It will help you save a bit of money here and there as you don’t keep paying for delivery fees, etc.
Do you see the point? The secret to saving money in your small business is by making smarter purchasing decisions. Don’t opt for the cheapest options you see, and don’t always try to save money right away. In the long run, it is better if you invest more money to get things that will last longer. It’s all about reducing your purchase frequency. Some businesses will benefit from this concept more than others, but all small startups should pay attention to it. If you spend a bit more money on one thing that lasts three times as long as the cheaper thing, then that expensive thing will save you money. Do the calculations to work out where you could save some extra cash.