Overspending
This small business mistake is part of a collection excerpted from Gary Schine's book 101 Small Business Mistakes
Overspending
Corporate middle managers who graduate to entrepreneurship have a tendency to overspend company money. A major corporation will not be brought to financial ruin if employees use expensive stationery as note paper, send documents by Federal Express that don't need to arrive next day, or fly business class without regard to the fare. However, a small business, especially a start-up, must watch its costs very carefully.
Practices that are considered minor wastefulness in a large company can literally destroy a small company. In fact, some small companies survive only because they can control wastefulness and thereby earn a reasonable margin while charging lower prices.
Corporate middle managers, turned entrepreneurs, also tend to assume that certain expenses are absolutely essential to operate a company. Do you really need a computer, FAX Machine, secretary, or cleaning company? If you do, fine, but if not, then do without for the time being.
A very successful entrepreneur once told me, "The perfect entrepreneurial business is a post office box to which people send money." The message-- keep it simple! Your goal is to make money, not to spend money. Obviously the magic P.O box is not a reasonable goal. However, if a small business person adopts that way of thinking, then every dollar in overhead will need to be justified in terms of earning a profit. The computer and FAX machine will be bought, and the secretary and cleaning company will be hired when each is justified in terms of cost effectiveness, not a day before. That is the way small business owners must think.
Other Business Mistakes and Misconcetions
- Failure to Prepare a Business Plan
- Myth-- A New Business Must be Based upon Uniqueness
- Overspending
- Momentum
- Starting a Business for Reasons other than Market Demand
- Entering into Partnerships without Clearly Defined Roles
- Not Putting Partnership Agreements into Writing
- Organizing A Small Company as a Large Company
- Misconception-- A Product Can Be So Good, It will Sell Itself
- Not Understanding Your Product's Benefits
- Believing That Experts Have Magic Answers
- Not Pricing Based on Benefits to Buyer
Search This Site
Search this site on Google
