Do you run a small business that generates a respectable or even impressive yearly gross revenues, but still find that you own income is measly in comparison? Many small business owners seem to be in a personal financial bind, even though their business performs quite well. The problem may be in learning to pay yourself first and making sure your own financial obligations are met.
The trick is determining where all the money goes. If your business is doing well financially, but you are suffering, it may very well be the decisions you make about where you re-invest profits into the company.
Let’s take a look at the most common areas where small business owners may overspend.
Too Much Technology
Some business owners are too focused on purchasing the “best” and most recent technology available. A smooth and well-functioning information technology system is a wise decision. However, many small business owners overspend on too many “gadgets” or equipment that could easily be substituted by less expensive equipment. This is a major area where many small business owners can cut back with a little creative technology spending, leaving more money for owner withdrawals.
Too Much Rent
Location, location, location: that’s the mantra told to most small business owners regarding where they should rent commercial retail, office, or warehouse space. The fact is that retail does have a huge “location” factor in its success. However, most small business owners who utilize warehouse or office space spend too much on commercial property when these locations do not offer any noticeable income increases.
Too Many Employees
Bless the small business owner who is able to hire employees and help reduce the unemployment rate. However, statistics show that a lot of small businesses hire too many employees. If the business processes are written down, followed, and continually updated for efficiency, there is a strong likelihood that fewer employees could get the work done. This might be a special area to hire an efficiency consultant to give some pointers.
Small business owner, congratulations on a successful business! But don’t forget to reward yourself. You made the company what it is today. If the business generates solid revenue, pay yourself first and make sure you are compensated for your efforts.