Categories: Finance

5 Questions Small Businesses Should Ask Before Spending

One of the keys to startup success is the ability to efficiently manage scarce resources. Among the scarcest resource for any small business is money. Startups have to adhere to a budget and know what and where the money they are spending is going to.

Asking the right questions can lead small businesses down the right path. When it comes to money, here are five questions that small business owners should be asking in order to get the most bang for their business’ buck.

1. How will this expense help repay itself?

One thing I learned in the early days of running a business is that expenses must bring a return back. It might seem obvious, but we’re conditioned to think we need certain things that, in reality, we do not. Eyeing each purchase you make with an eye towards return brings much needed focus back to the company.

Some expenses might not have clear returns. For example, while office supplies won’t make you money they are still necessary to buy for an office to function properly with. Others expenses might be a bit more clear. Seminars and training that boost skills within various departments can lead to measurable results back to the business.

2. Do we have a plan for follow through?

A few years ago my small online publishing company was having issues with our web host. We knew we needed to switch to a new provider, and wanted to get it done ASAP. With a little research I found a highly rated host with reasonably priced dedicated hosting. All good things, right?

As we found out, we had not considered many aspects of the follow through. Most notably, we didn’t know how we’d go about migrating our data to the new servers. That turned out to be a prohibitively expensive endeavor. Because we couldn’t afford the move, we had to eat the money spent on the servers. That pushed back our move considerably. Always be sure to research the follow through details as thoroughly as possible before making any sudden decisions – it’s time well spent.

3. Is this the best price possible?

Many, if not most, of business-to-business transactions involve a flexible price. It might not seem that way initially, but there is often room for negotiation. Savvy small business owners should never buy products or services without feeling out the flexibility.

In the book, Never Lose Again, authors Steven Babitsky and James Mangraviti pose 50 questions that can help anyone get a better deal on almost anything. Small businesses can use the tactics from this book in order to negotiate better prices in exchange for concessions that they can more easily afford.

4. Are we getting the most for our money?

If a small business wants to stretch its dollar, it can look to variable expenses. For instance, a small business can reduce its electricity bill by reducing consumption. According to power giant ABB, many companies can save by using less energy, since buildings account for such a disproportionate amount of energy usage.

Finding inefficiencies in recurring expenses can lead to recurring savings. If a small business can take some of these energy saving tips and turn them into $20 monthly savings, that’s $240 per year. Find three or four such areas for your business in order to maximize the savings made.

5. What will happen if we don’t spend this money?

One of my publishing partners asks this question every time we’re about to write a check. While we still write the check most of the time, we’ve saved a great sum by carefully considering the consequences of not taking this action. In so many instances they just weren’t significant.

By avoiding what amount to unnecessary expenses, we’re able to better focus our limited funds. That has allowed us to save money for items that are much more critical for our mission.

Joe Pawlikowski has owned and worked for small businesses for more than five years. His companies primarily produce content, using new media tools and agility to stay ahead of the mainstream pack. He chronicles his experiences at his blog, A New Level.

Deborah Sweeney

Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With extensive experience in the field of corporate and intellectual property law, Deborah provides insightful commentary on the benefits of incorporation and trademark registration.

Education: Deborah received her Juris Doctor and Master of Business Administration degrees from Pepperdine University, and has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in corporate and intellectual property law.

Experience: After becoming a partner at LA-based law firm, Michel & Robinson, she became an in-house attorney for MyCorporation, formerly a division in Intuit. She took the company private in 2009 and after 10 years of entrepreneurship sold the company to Deluxe Corporation. Deborah is also well-recognized for her written work online as a contributing writer with some of the top business and entrepreneurial blogging sites including Forbes, Business Insider, SCORE, and Fox Business, among others.

Fun facts/Other pursuits: Originally from Southern California, Deborah enjoys spending time with her husband and two sons, Benjamin and Christopher, and practicing Pilates. Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Deborah, and MyCorporation, have previously been honored by the San Fernando Valley Business Journal’s List of the Valley’s Largest Women-Owned Businesses in 2012. MyCorporation received the Stevie Award for Best Women-Owned Business in 2011.

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View Comments

Charleen Larson says:

12 years ago at 5:51 PM

I like "What will happen if we don't spend this money?"

I don't want to be too specific here but there are some entities that will try to impose fees on you. But apparently if you don't pay, they don't follow up. So I have a "What will happen if I don't pay this?" policy. The answer, sometimes, is "Let's find out."