I know it sounds absurd. Seriously what sort of business owner would willingly allow their business to be robbed? But it happens all the time and the worst part is they don’t realise it until it’s too late, the business cash flow has run dry and they have to close the doors on their dream.
Think of a physical safe. An almost indestructible and in most cases impenetrable steel box. A lot of businesses have a safe. Maybe it’s for storing petty cash, insurance policy documents or important passwords. Whatever it is they work hard to make sure it’s secure; they wouldn’t dream of leaving it out on the street with the door wide open swinging in the breeze.
So while a business owner works hard to protect the petty cash, at the very same time they can be unwittingly allowing themselves to be frequently robbed of hundreds, if not thousands, of dollars. How? Let’s look at four common mistakes small businesses make that costs them dearly.
1 – Unnecessary complexity
Do you really need to be GST registered? Do you need expensive accounting software? What about FBT? Sometimes they are – if in doubt check with a reliable accountant – but quite often, particularly for small businesses much of it is not required. Compulsory GST registration is only needed where turnover is (or expected) to exceed $60,000 and FBT is only required when gross tax exceeds $500,000.
It’s like packing for a holiday – you generally need a lot less than you think you do!
2 – Expensive money
A wise builder (and accomplished businessman) said to me once that you always pay off your most expensive money first. That means if you have loans with a higher interest rate, you get rid of them first before tackling other debts. You can take this advice one step further and say try avoiding expensive money in the first place.
Like any debt, ask if it’s really necessary before committing yourself. Debt can be a trap for the unwary particularly if the economy takes a dive.
3 – Zero ROI traps
ROI, or Return on Investment, is the payback you get for investing in something, like the interest you might get on a savings account at the bank. Now imagine if not only the bank didn’t give you any interest, they actually took some of your savings off you. That’s negative ROI.
The aim of every operation in your business should be to generate positive ROI. For some items it may be difficult to see a clear ROI but if it ultimately contributes to an overall positive ROI for your business then it’s doing its job. Everything else should be sidelined.
4 – Not shopping around
Beware of smaller recurring payments that can add up. Shop around regularly to make sure you’re getting the best deal, particularly for things like hosting on your website.
Something else to watch for is framing. Framing is how marketers will make something appear cheap. They put it beside something that is ridiculously overpriced. For example, a $3000 website seems cheap when up against the premium version for $8000. Not shopping around could mean you miss the fact that you can actually get a quality business website for under $300 with no strings attached.
Running your own business can be hard enough without adding the burden of unnecessary debt or complexity. The good news is that a little bit of research (like you’re doing right now) and finding the right business partners can make all the difference. Feel free to talk to us about any questions you have – we’ll be happy to advise.