As an example, consider your marketing budget. You may spend hundreds of pounds on magazine advertising. Your ad looks great, with your business name and logo prominently displayed, but if your analytics don’t eventually see an increase in sales worth more than the amount you spent on the ads, then this hasn’t been a good use of your marketing budget.
Keeping your budget on track
We’ll assume that if you’re in business you already have a budget worked out. You know what your fixed costs are and how much you need to spend each month to keep things ticking over. We’ll also assume that you’re putting a certain amount of your profits back into the business in order to help you expand and grow in the future.
It’s important, however, to review and if necessary revise your budget, at least on an annual basis. You might even want to do this every six months. The reason is that business priorities change, and so do costs. Spending x amount on service y may have made sense this time last year, but it may be a waste of money if circumstances have changed considerably since. Bringing in an outside financial advisor may help you to see how you could budget more effectively.
You should always be looking for ways to make your budgeting more lean and efficient, though preferably without compromising on efficiency, wages or the quality of product you offer. You should regularly review your suppliers to make sure that they’re still charging you a competitive price. Of course, it’s not always a good idea to go for the cheapest supplier, and there may well be other good reasons to stick with the supplier you’ve got. But if you’re paying over the odds through loyalty, it might be worth trying to negotiate a discount, or other perks like extended credit.
Think outside the box
Sometimes the most obvious way of doing things isn’t the most cost-effective. You may be spending more than you need to on something, just because it’s the way that it’s always been done. An example is paying high rents for office space you don’t really need. If you only use that room for storing equipment, stock or other items you don’t regularly use, you might be better off looking into business storage, where you can keep these things for a much lower cost.
Expect the unexpected
Keeping a certain percentage of your budget back in case of disaster is always a good idea. You need to be able to ensure business continuity in the event of a fire, flood, burglary or another incident of a similar scale. It should go without saying that you should also make sure that you’re fully insured against such events. But even so, budgeting and planning for disaster recovery is strongly advised.
A lot of businesses put all of their time and energy into creating a good product, but don’t know how to sell it effectively. In an ideal world quality would naturally out, but tragically a lot of very good small enterprises go to the wall because they haven’t been properly marketed. If you don’t have the time, resources or skills to market your business in-house, it’s worth paying a professional firm to take you on.
Marketing isn’t always about reaching the widest possible audience. Spending money to reach people who aren’t likely to buy your product anyway is a waste of your budget. Targeted marketing that’s designed to reach a specific demographic and conveyed in a way that will appeal to them, is much more likely to reap dividends than trying to be all things to all people.
Think about how you allocate your budget, and keep thinking about it. What worked last year may not work as well today. Don’t be afraid to invest in ways to help your business grow, but keep a close eye on how these investments perform. Prioritising how you spend will ultimately let you keep moving forward and will generate greater profits in the long run.