Business Costs To Avoid
Posted on May 23, 2017
When you are running a business, you have to keep a strong control over your expenditure. Costs can quickly stack up, and before you know it, there is more money going out than you realise if you aren’t closely monitoring the situation. There are some expenses that simply can’t be avoided such as staff wages, equipment or premises. However, when failing businesses ask for an advisor to help them assess their finances, there are often a number of unnecessary costs identified.
Here are a few examples of costs that could be avoided:
Business vehicles – While it is usually not avoidable to have vehicles for your business (depending on your line of business) how you pay for them can differ greatly. If you are buying a fleet of vans or even just one Ford Ranger, the upfront cost or loan deal could set you back a hefty amount before your business is even starting to make a profit. It is usually a better financial option to lease the vehicles at least until you have some money behind you. Also, consider purchasing used cars as they run just as well and are usually half the costs.
Paying for staff you don’t need – When you’re running any business, your staff requirements can fluctuate on a regular basis, and sometimes you can find yourself paying someone in a full-time role which you don’t utilise fully. Sometimes there are alternative options like taking on a freelance or even agency worker in the times when you need more work to be completed. Once you set up employment contracts it is not particularly easy to get out of them, so carefully assess how many people you will need before you make any job offers.
Taking out long leases on premises – Sometimes the perfect premises become available, and you are that keen to get it secured that you hastily fall into the trap of agreeing a longer lease than you need. When you are just setting up a business, the future can be very unpredictable.
Not only will you be uncertain of whether your business will be sustainable but also if your business significantly grows then you will have the problem of needing bigger premises. And if you are tied into a long-term agreement this could mean unnecessary costs. It is better to start off on short-term agreements when you are first venturing into the world of business ownership. The last thing you want is a failed business and years left on a lease for premises that you can’t get rid of!
Lack of productivity – This isn’t a cost that is easily defined, but one of the biggest drains of money in business is through lack of staff productivity. If you have a set of employees that aren’t engaged and motivated to work hard for the business, then you are losing significant money here. Don’t underestimate the power of raising engagement amongst your employees and make sure that your recruitment policy will filter out the time wasters who lack the motivation to work. This area is really important to get right.