In one of the final sections of our Publishize book, I list my 10 Keys to Success. Because I only briefly touch on them in the book, I’m expanding on them here. Here’s number four in the list.
This key is particularly timely in today’s economy. If you spend wisely, your business is better able to withstand economic upheavals. Even with the best planning, sometimes external events can have an affect on your business. For example, I did a huge mailing that went out September 10, 2001. Needless to say, the response to my mailing was exactly zero. Things like that happen in life and in business, so it pays to be prepared. If you have a financial “buffer,” you won’t go broke when bad things happen.
In fact, I’ll admit it: I’m a cheapskate. People trying to sell you stuff often tell you otherwise, but being cheap is a good thing in business because everything is cyclical. Lean times will happen. It’s a given. Everything that goes up must come down, whether it’s the stock market, real estate, or hyped-up technology. (Remember the “dot bomb” bust?)
I’m not saying you shouldn’t invest in critical tools, education, or supplies for your business; you should. However, you should think about every dollar you spend and what your choices mean in the long run. For example, suppose you need new business cards. Don’t get talked into the $250 gold embossed laminated version, when you can get a perfectly reasonable set of cards for $20 or $40.
Different people have their own comfort level when it comes to spending money, so you need to think about what’s important to you. Although some short-term business debt may be necessary to deal with cash flow issues or start up expenses, you don’t want to get in so deep that you have to go out of business. Overspending is a key reason many small businesses don’t make it beyond the first couple of years.
When you are considering your spending habits, you need to evaluate what is vital to making money versus stuff that’s “nice to have.” Many people bandy the term ROI (return on investment) about a lot, but basically it comes down to evaluating what you receive for the money you are spending. For example, in our case, it’s vital for us to have a Web server and a merchant account. The return on that investment is obvious from the sales we make through our Web sites. However, you should avoid signing up for too many services with recurring expenses that add to your overhead. Again, really think about what you get for your money.
You also should pay attention to the “latte factor.” David Bach coined this term to describe “the simple idea that all you need to do to finish rich is to look at the small things you spend your money on every day and see whether you could redirect that spending.” Although Bach tends to talk about the latte factor in the context of personal spending, the same concept applies to business. You need to pay attention to all the “little” things you spend money on in your business. Are they really necessary or just “nice” to have? One thing is for sure, all those little things can add up!
If you’re in business for the long haul (as we are), then taking a little time to consider your spending habits can pay big dividends. We’re on our 14th year in business and have survived more than one recession. Given my cheapskate tendencies, I’m confident we’ll ride out this one too.