As a small business owner, you already know that you have to spend money to make money. But before you go all in and start writing checks, it’s wise to get to know what you should and should not be spending on. Sometimes, what you don’t buy has the biggest impact on your overall profitability. Olive Group presents some tips you need to keep in mind.
Before we get into things you shouldn’t invest in, let’s take a look at a few that you should.
- Business formation. If you’ve been operating as a sole proprietorship, it’s time to consider switching to an LLC business structure. While you don’t have to pay huge lawyer fees to get it done, there are a few costs associated with the process. Depending on where you live, you may have to pay for a business license, and if you plan to use a formation service there is a small fee. Fortunately, your legal expenses may be tax-deductible, and establishing an LLC has other tax benefits and is flexible when you’re ready to grow. Fortunately, companies like ZenBusiness PBC can help you register your business so that you stay compliant with state regulations.
- Advertising. Advertising runs the gamut from promotional swag (such as keychains and coffee mugs) to your website and social media ads. Since the vast majority of business takes place online these days, advertising through multiple digital channels is a great way to draw attention to your brand. The Olive Group specializes in digital marketing, and we can help you develop strategies that will help grow your business.
- Legal and financial services. No matter what industry you are in, every small business needs an accountant. Ascension CPA explains that having someone else handle your finances can save time and make sure you take advantage of tax breaks available to you. Further, it will keep you from letting financial missteps ruin your business.
- Insurance. Even as an LLC with some legal protections, having liability, commercial property, business interruption, and equipment insurance can help protect your company’s investments in case of an accident, shutdown, or legal action. Moreover, if you have employees, do offer benefits that include insurance. While it is an extra cost to you, Resourcing Edge notes that health and disability insurance are among the top most desired discretionary benefits. A competitive compensation package that includes benefits is a great way to ensure you attract the best employees.
Obviously, there are many things you should spend your money on. But what shouldn’t you?
- Office space. Most startups and many small businesses can operate remotely, saving the overhead of up to $12,000 per year per employee.
- Band-Aids. Not literal bandages, but those fixes that only offer short-term solutions. This applies to all aspects of your business from your technical compliance down to your cleaning products.
- Too many employees. While you absolutely need help, look for employees that can fill multiple roles. Even if you pay these individuals more to start, it’s a better value, and you’ll have employees that are more intimately familiar with your company.
- Unnecessary perks. While benefits are certainly important, things like foosball tables and free beer Fridays aren’t necessary. These are fun, but typically do not improve employee morale or engagement. Instead, focus on providing your employees with a professional environment and, most of all, respect their time and abilities.
In addition to knowing when and when not to spend money, it’s also wise to pay close attention to how you handle your finances each day. Make paying your employees on time a priority, and don’t skip paying your taxes. Keep in mind that how you react to financial missteps matters, too. For example, do not dump a ton of money into a potential and untested revenue stream if you notice a small dip in sales. Instead, refocus on those products and services that make you the most money, and do those better than anyone else.
Money may not be everything to you, but it is to your business. How you handle your cash flow can make or break your bottom line, so be smart about your expenses. Doing so means you’ll be in a better position to weather storms and that you’ll have the money in infrastructure in place to grow when it’s time.
Olive Group’s award-winning team is ready to help grow your business! Contact us today at (253) 785-9623 to learn more about how we can help your business reach new heights.