It’s easy to stack on the extras while your business is growing. You can rationalize getting the bigger office, the faster Internet and the nicer chairs. You don’t have to watch your bank account like a hawk for monthly expenses that chip away at your profits. You can convince yourself that you can put-off firing the person who doesn’t add value to your company because you’re not scraping by. Or that everything’s fine so why shake things up with change.
But once your growth slows down, and it will if you’re not watching expenses, you’re going to wish you stayed lean and hungry for profits.
I’ve been running my business GainTap for almost 5 years and in this time I’ve experimented and found what does and doesn’t work for me in terms of growing my business. I’d like to share that experience with you.
Understand Your Role As a Business Owner
Delegate work so you can focus on growing the business’s profits.
Everything you do as a business owner needs to be focused on maintaining or growing profits. You have market strategy, quality of your product or service, customer relations and hiring / retaining talent to worry about. This is a lot of work. Don’t spend your time messing around with things that aren’t focused on profits.
Too often business owners can’t stop working in the business and they fail to work on the business. They don’t involve contract workers or employees when they should. They take on more responsibility and end up bottle-necking growth with late delivery or poor quality work. Think about it this way. If you’re slowing things down by taking on too much, aren’t you hurting your profits? Aren’t you keeping yourself from growing?
Most likely you have one of two problems: a people problem or a process problem. You may have a people problem where you either don’t have people or have the wrong people. They may be nice and you’d get a beer with them, but they’re just not taking stuff off your plate like they should. Your options here are getting different people or setting the right expectations with your current people. After a period of time if expectations aren’t being met, get new people.
You may also have a process problem. I’ve found this happens because you take on work that’s outside your core focus. With us, we’d take on website design projects because clients wanted work done by someone they trusted. And in my infinite inability to say no to good clients who have a problem, I would say “sure, we can do that.” The problem is, we’re not web design specialists.
Our work with landing pages and conversion optimization involves web design. Our specialty is in helping companies redesign their website without losing SEO. So yes, we understand websites.
But built-from-scratch web design is less than 5% of our work. So when we take this work on, we don’t have the right processes and all work suffers. Not just the new website design work. But all work that involves the people on that project.
That isn’t fair to all clients. It’s not fair to the people who want a new website and it takes longer than expected. And it’s not fair to the people who pay for search marketing work and have distracted people doing projects they’re not specialized in.
So now we turn this work away and only focus on our core specialties. I’ll pair clients with specialists that can help them instead of take on work that we’re not a good fit for. Everybody wins.
Pay When It’s Painful
Start with the cheapest, easiest and fastest option – then scale up when you start getting uncomfortable.
Don’t pay for things until it’s absolutely painful to not do so. This means hiring, upgrading software, moving into a new office space, etc.
It’s tempting to get the premium option. But ask yourself if you can get by with the budget option first. Then when you outgrow it, upgrade.
Let’s say you have an idea for a new service. Instead of mapping it out, automating things and investing in infrastructure immediately, you should prove that people are willing to pay you for the service. Invest in automation once there are so many people paying for it that you’re getting annoyed with the current process.
Currently, I do enough consulting that I can handle scheduling and invoicing via email. However, if this scaled up to the point that I was overwhelmed with emails and missing appointments, I’d invest in setting up an automated booking calendar and payment on my website.
To do this now before there is an uncomfortable level of demand would be a foolish way to spend my money and time.
Don’t Get Comfortable With Your Expenses
Cutting wasteful spending is the fastest way to more profits.
As your business grows your tolerance for spending will increase. When I first started my business, $200 was my limit for spending in a month. Then it went to $500, $1,000, $3,000…I work with clients who are accustomed to having $50,000 a month in shoulder-shrugging-don’t-know-if-it’s-worth-it expenses.
I have one client where I went in and hacked this down by 20%. That’s $10,000 in savings per month. That covers a couple salaries.
Check your bank accounts and credit card statements monthly. Ask yourself if you really need the recurring expenses you see. If you don’t know, consider hiring an expert to advise you. You’ll often save much more than you’ll spend. My client spent $500 for me to save them $120,000 in a year. Nothing creates more profits faster than cutting wasteful spending. I’m not advocating being cheap, stingy or otherwise foolish enough to think you don’t need to spend money to make money. But you should understand what you’re spending and what it’s doing for your bottom line.
Don’t Make Expensive Decisions Based On What Everyone Else Is Doing
Ask yourself if the decision will lead to profits for your business or is “just what everyone in this business does.”
One of my business goals was having an office with a specific property company, in a specific area in Chicago. I started my career over a decade ago in one of their offices. And having one for myself was a milestone I set years and years ago. I thought as soon as I got this office, it’d be this huge accomplishment for me. I’d made it. I had an office like other agencies. I was successful.
So I got the office and was thrilled. But then I realized all the things that come along with having an office. This may sound like common sense, but there’s more to an office than monthly rent and utilities. You need furniture, decor, a fridge, microwave and water. Just basic stuff to get by spending 8+ hours in a room.
Common sense can be elusive when you’re thinking with your ego. Even with keeping my costs down, my two person office cost $4,000 to furnish. That’s not an incredible sum of money. But I’m normally obsessive about numbers and potential.
I could spend $4,000 on Google Ads and get at least 40 leads. The desks, chairs, rug, lamps and thousands spent on rent weren’t equivalent to their cost as leads. They weren’t adding to my profits. I could have taken that money and gotten a 300-500% return on it in the short term, who knows what it’d be in the long term.
The office had an area for filming videos for our website. I wanted to start a series of videos to help explain my thoughts on search marketing and connect with people in a way that doesn’t happen over text. And then I could write-off the office expense as a marketing expense in my mind, too.
Turns out the office building was extremely noisy. I couldn’t get a single video recorded without spending hours to get the timing right between noises coming from other areas of the building.
On top of all this, I found myself chained to a desk because I felt obligated to be in my office every day to get the most out of it. I put on weight. I dreaded going into the office. Getting away from the office was one of the main personal reasons for starting my business. So it was ridiculous to think that I grew myself further away from my core goals by chasing what seemed like “the path everyone has to take” with their business.
After the year lease was up, I opted for a shorter four month lease and decided not to renew my office lease after it expired. There has been zero drop in quality of work we deliver, client satisfaction or output functioning as a remote team. Just gains in healthier lifestyles and less expenses.
I hope my experiences will help you make better decisions around your finances as you continue growing your company.