Business owners continue to make money mistakes that are causing them to lose money every year. Small mistakes, easily overlooked, can quickly add up, reducing a company’s overall income and leading to lower overall cash flow.
Business is challenging enough, and understanding how to save money can make a world of difference.
A few common errors that are causing business owners to spend more money on their business than they need to include:
1. Diversifying the Business Too Quickly
Niche businesses make more money, and there are several reasons for this. One: niche businesses may be able to charge more for specializing in one particular area of business. Two: niche businesses are able to streamline their operations.
We’ll use restaurants as an example.
In the restaurant business, a full-service restaurant has margins close to 2%, and a limited-service restaurant can have margins near the 6% range.
Limited-service restaurants opt to optimize their hours and food options to make money. Diversifying too quickly, or adding too many menu items, can lead to a business losing sight of its goals.
And diversifying can take time away from core business operations.
2. Not Having Property Tax Increases Examined
Property tax increases are hitting small businesses across the country hard. Assessors often miss the mark on property taxes, and this was seen in Chicago when between 2009 and 2012, property taxes remained the same for over 20,000 commercial properties.
This is concerning because the recession hit in 2012, causing property values to plummet, yet commercial entities were paying the same rates they were paying in 2009 for property taxes.
If property taxes are rising or you believe that they’re too high, you can appeal the increase and have an accessor come out to rectify the issue.
Appeals can save a business hundreds or thousands of dollars per year.
3. Failing to Invest in People
A key mistake that businesses make, especially smaller businesses, is not investing in people. Businesses opt to hire the cheapest labor, and this can lead to a reduction in:
- Customer satisfaction
Investing in expertise can lead to higher production levels, a streamlined business and a company that grows. Technology and any equipment needed to streamline operations will also be included in the equation, allowing businesses to grow and save money in the long-term.
4. Tackling Taxes Without an Accountant
A CPA can be expensive, and some statistics put the cost for a small business being between $1,000 and $5,000 per year. Accountants pay for themselves in savings and the assurance that the business is taking advantage of all of the tax breaks and deductions available to you.
When small business owners do their own taxes, they risk missing many of these key deductions that can save them money on their taxes.
With the right accountant, the business will be able to save money and avoid a timely audit from the IRS if an error occurs.
Small businesses should actively look for ways to save money, reduce overhead and keep their business financially sound.