Many entrepreneurs will face problems with finance throughout their careers, entrepreneurship and tight financial controls are not two things that seem to correlate.
Whether it’s over-spending on office space, luxury travel or things that you can actually justify you need for business, many entrepreneurs have trouble with spending too much. Many a business has gone under due to out of control spending and costs so we decided to compile four key areas where you can look at your business with a new perspective to reduce. More often than not revenue is the focus but always ask yourself and measure at what cost, literally.
Now if there’s one thing that you hear justification for all the time it’s travel and don’t get me wrong, travel is important but luxury hotels and flights are not. Even if you’ve raised 500K+ you should be taking a coach and in cheap hotels or hostels until you’re solidly generating revenue and can seriously justify this type of expense, from the productivity you gain from comfort. Take a good hard look at your travel budget.
2. It’s only coffee
Another major area is out of pocket expenses for coffees, snacks, food, you name it. Especially if senior team members have company cards, a lot which you can’t arguably justify as a reasonable business expense is spent each year. A good way to tackle this is to take away the company cards and have an expenses scheme where team members apply for reimbursement later or set weekly or monthly limits on certain activities. It sounds trivial but coffees, especially in London, add up!
3. Funding, time to buy everything
Once you’ve raised capital take a step back, don’t spend anything out of the ordinary for a week, during this week make a plan for where you should spend and why, try to ultimately justify any expense as something that contributes to growth and if it doesn’t don’t spend on it! Do not go on Amazon and upgrade everyone to the latest Macs!
4. Regularly check your finances
Being in control of your spending is key to your financial success, revenue too but cost is just as important, you can be making all the money in the world and spending more. Make sure, whether you like it or not, to know where you’re at financially, where your going and have it tracked closely by yourself, even if you have a CFO. This is the real crux of most startups burning capital too quickly, often the finance is not carefully managed, investment seems like a bottomless pit and within 6 months you hit the edge of that pit.