Are budget leaks slamming your bottom line? Are you spending money on things you aren’t sure are valuable? No one likes to waste money, especially in business, where it can mean the difference between Christmas bonuses and Christmas layoffs. Here are seven costly mistakes your business is probably making.
1. Overbuilding your product
You’ve heard the mantras of “minimum viable product” and “sell before you build.” This isn’t just good advice for tech startups — it’s good advice for everybody. Overbuilding leads to overspending in two ways:
- You make assumptions about what your customers want, and since at least some of those assumptions will surely be wrong, you end up wasting time and money building the wrong thing.
- You build a product that may be awesome, but you can’t sell it, so then you’ve wasted time and money on something you can’t sell.
Don’t overbuild. As Kevin Faul writes on his future perfect blog, “Validate first, scale and grow later. Talk, date, marry, have kids.”
2. Hiring employees you don’t need
It’s fun to hire — bringing on more employees is a huge step for your business. But in terms of productivity and success, hiring too early and hiring poorly can be worse than not hiring at all.
Before bringing on new employees, think long and hard about whether you really need them. For example, do you really need a live receptionist or will a combination of a virtual receptionist and a visitor management system do the trick? Do you really need a graphic designer or can you outsource?
When you decide you do need a new employee, make sure you hire the right person, i.e., someone with the skills you need and who is a good cultural fit.
3. Buying too much technology
Now don’t get me wrong — we LOVE technology! But many companies make the mistake of buying too much technology, either by literally buying too many software applications and pieces of equipment or by buying expensive software that exceeds your needs.
For example, you can pay $49 a month for a lightweight marketing automation software to run your email campaigns, or you can pay $800 a month for an application that will do everything under the sun. So, the question is, do you need everything under the sun or will the $49 option work for you right now?
4. Ignoring the customers you have
New sales are awesome, and they deserve to be celebrated! But don’t become so focused on getting new sales that you neglect your current customers. It costs as much as seven times more to get a new customer as it does to keep one you already have, which means you can drive more business and save money by finding ways to continually delight (and upsell) your current customers.
5. Not using data to drive your decision-making
Are you making business decisions based on hunches? Many executives still rely on intuition when making decisions, rather than on data. But intuition alone produces biased results.
For example, one study showed that for evaluating candidates and predicting job performance, data beat human judgment by as much as 50%. Another study found that nearly half of companies that considered themselves to be outperforming their rivals made decisions based on data. Of companies that were just keeping pace or actively shrinking, only 10% employed a data-driven approach.
Especially for new companies, there is a huge temptation to undercharge as a way to drum up business. After all, some business is better than none, right?
Undercharging for your products and services can affect your profitability into the future, because once your pricing gets out, it will be very difficult for you to raise your rates. You will become a discount brand, and that might not be the image you are trying to portray. To avoid this outcome, set your rates based on the value you provide and be consistent about your pricing.
7. Being short-sighted about your future
Finally, don’t forget to plan for the future of your business. While you may be putting in 80 hours a week right now just to stay afloat, it’s not too early to start devising processes that will enable to you scale. The simple truth is that if you don’t plan for the future, you might not have one.