10 Places Small Business Owners Shouldn't Cheap Out

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November 9, 2018

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Small business owners are cost-conscious, and rightfully so: They don’t have a large financial margin for error, especially when running a startup—which means that every dollar spent needs to add value to the business.

Sometimes, business owners take this idea too far and cut spending everywhere they can. They try to DIY everything, stick to only the free versions of apps, and load up their employees with responsibilities and call it “working for a startup.”

Being cheap, even when paying yourself an entrepreneur salary, isn’t always financially sound. There are some areas where small businesses should invest in doing things more effectively and efficiently. The cost savings will pay for themselves in the long run.

Here are 10 areas where small businesses owners shouldn’t cheap out:

A point-of-sale system that takes credit cards

In most cases, not accepting plastic is no longer acceptable. Cash and check payment is on the decline in the U.S., to be replaced by card payment. Point of sale systems by companies like Square make taking credit cards (relatively) painless—the small fee you pay per credit card transaction will pale in comparison to the sales you lose by only accepting cash.

Hiring an accountant to help with finances

There are plenty of tools your business can use to help with your accounting and tax needs, but an accountant does way more than just file your returns. Accountants can help write business plans, determine legal business structures, manage your payroll, and take over responsibility for financial affairs. Respondents to the Wasp Barcode State of Small Business Report say their accountant is the most important professional to their business, ahead of their lawyer or technology firm.

Payroll and health benefits

It may be tempting to cut financial corners by lowballing employees or passing up on providing them health coverage or other benefits. However, it costs about 33% of a worker’s annual salary to replace them, and you can expect high turnover if you don’t demonstrate that you’re as invested in them as you ask them to be in you.

Paying for health insurance as a small business is an investment: There are tax benefits and credits to offset the cost, and healthy employees are happier and more productive as well.

Paid time off and sick days

Once you’ve got people on board, it’s important to treat them well. Don’t run them into the ground—give them permission to take time off when they’re feeling sick or need a vacation.

Workplace stress reportedly costs businesses $300 billion annually in health care costs and days missed, and while that might feel a little big and vague compared to your small business, know that a missed day of work costs companies $602 per employee per year. Don’t lose money, or your employees altogether due to burnout, over not being flexible with paid time off.

Culture-building activities

You can’t put a price tag on what company culture is worth. It’s also difficult to know how exactly to invest in culture, but even little things can go a long way towards increasing employee engagement—and organizations with above-average engagement report an average of 147% higher earnings per share.

Take the time to create onboarding documents and procedures so new employees feel comfortable and a part of the team right away. Publicly recognize and reward good work in company channels, such as in team-wide meetings or on communication apps. And splurge on the occasional party, happy hour, or day off together to help bring people together.

Customer relationship management software

Using manual processes to keep track of sales leads is a sure way to lose them. Invest in customer relationship management (CRM) software to help you find, pursue, and close leads. A cloud-based system will register leads and contacts, share notes among your team about customer interactions, alert you when you haven’t followed up on a critical task, and keeps your customer data in place even as your team moves and changes. To manage all your new customer data, sign up for a tool such as PieSync to help share information across your different applications.

Communications apps

A good communications app is worth paying for, especially if you run a company that allows for remote work or has multiple offices. You’ll want a tool that can scale with your team, keep conversations organized, and integrate with other workflow tools.

Slack is an incredibly popular option for businesses big and small and combines simple chat functions with more complex capabilities like file uploads, task automation, and other add-ons.

Customer loyalty program

Your existing customer is worth more than a new customer: Not only does it cost 5 to 25 times more to acquire a new customer than it does to sell to one you already have, but existing customers tend to spend more than new ones as well. Create a rewards program that gives perks to customers for repeat visits. The cost of the occasional free item is worth building that relationship.

Inventory and asset management systems

This is another area where too many businesses use paper and pen, or other manual processes, to track what should be done digitally. Using tracking software, businesses can follow their inventory along the supply chain, or check on the state of their fixed assets, such as computers or vehicles. Knowing your inventory turnover ratio, or when your fixed assets are set to fully depreciate, can help you become a more efficient business almost right away.

Your facility or office space

If you’ve got a brick-and-mortar store, you know how important it is to present a clean, professional space to potential employees. But businesses shouldn’t skimp on their office space either: A dreary office, with poor lighting, uncomfortable furniture, and no “extra-mile” additions like plants will give a bad impression to clients and affect productivity.

Being cheap isn’t the same thing as being savvy. Good business owners know when and where to invest in the things that can boost productivity and efficiency, which in turn pay for their investments. For now, skip nap pods and catered lunches, and start with these areas.

About Eric Goldschein

Eric Goldschein is a staff writer at Fundera, a marketplace for small business financial solutions, covering entrepreneurship, small business trends, finance, and marketing.