Poor business spending practices or perhaps I should all them habits, has been the cause of more business failures than any other single issue. And it’s no wonder. We aren’t born knowing how to manage money…especially not for our business.
Most of us aren’t taught how to properly handle money either.
My dad once sat me down with his big green ledger and tried his best to explain budgeting to me when I was a kid…maybe I was too young? Maybe I just wasn’t interested in anything my father was saying (perhaps a wee bit of teenage angst…)? Maybe it was the negative associations I had with that stupid green book! I can still hear my father’s voice…”sorry, nope, we’re not getting it! It’s not in the ledger! Anyhow, for whatever reason I remember very little about that green ledger other than hating it.
I was fortunate enough to go to university where I studied business and marketing and all kinds of other things like Business Spending.
And while I was fortunate, most are left to figure it out along the way, through much trial and error.
The same mindset issues and bad habits that wreak havoc in your personal finances can plague your business as well if you’re not careful. Let’s delve into a few things you can do to combat bad Business Spending practices.
Proper Business Spending Practices Begin With A Plan of Action To Combat Shiny Object Syndrome
Some things are just hard to resist—especially when your friends and colleagues are all jumping on board!
New tools, training, group coaching programs and even business models can all have a strong pull, and if you aren’t careful, these shiny objects can quickly distract you from your current goals.
If you find yourself catching shiny object syndrome frequently, try this two-step plan instead:
- For “too good to refuse” offers, make a plan for achieving a positive ROI before you purchase. If you cannot find a (realistic) way to make the purchase pay for itself, don’t buy it.
- For exciting new business ideas, create a “someday” list. Jot down your idea and a basic outline, then get back to the task at hand. Now that great idea won’t be lost, but it also won’t join the ranks of half-finished business plans that litter the internet.
Don’t Fall For That Sunk Costs Fallacy
If you’ve ever said to yourself,
“I’m not using this subscription, but I can’t give it up!
OR
I’m still paying the launch price and now it’s much more expensive!”
Then you’ve fallen for the sunk costs fallacy.
This common mistake is famous among economists, and we all fall victim to it from time to time.
Simply put, the sunk costs fallacy is what makes us justify our Business Spending and investing more money or time in something—even though we’re not seeing results—because we’ve already spent so much.
It’s what encourages us to repair the car one more time (after all, you just put new tires on it), eat a meal we don’t enjoy (simply because you’ve paid for it), and yes, continue to pay for tools and resources you’re not using.
I urge you to take a few minutes and examine your current business spending. Make a list of what you’re paying for month after month…investigate to see if you’re even still using it or at the very least getting something out of? Either make a plan to put them to work for you, or cancel them. So please…stop falling for the sunk costs fallacy.
The Pendulum Might Swing To Far In The Other Direction.
You thought this was all going to be about business spending or I guess I should say overspending, didn’t you?
Here’s the kicker: Spending too little is just as bad for business.
When you’re constantly on the lookout for free and low-cost tools or working 16-hour days because you “can’t afford to outsource,” you’re not doing your business any favors.
Sure, it looks like you’re bootstrapping and working really hard to make something from nothing, but what you’re really doing is digging yourself a rut it will be nearly impossible to climb out of.
Not only that, but you’re reinforcing a scarcity mindset that will continue to plague you and your Business Spending for years if you let it.
Rather than pinching pennies, learn strategic business spending
Buy what you need, when you need it.
Invest in top-quality products and programs rather than settling for the low-ticket, half-baked plans.
Just like quality clothes, cars and furniture, quality services and software last longer and usually works better. And unlike that car, good quality business tools will pay for themselves.