Each year, almost 400,000 new businesses are set up in the UK.
But, taking a company from an eager start-up to a rocksteady brand is far from straightforward.
There are plenty of ups and downs which you need to navigate if you want to see your business still standing in five years.
The biggest hurdle? Money.
?We?re all about saving SMEs money on their utility bills,? says Phil Foster, CEO at Love Energy Savings.
?We know that there are plenty of other things that SMEs could cut down on to strengthen their prospects.
“Increasing an understanding of the common pitfalls owners fall into on money is key to ensuring business continues to thrive.?
Love Energy Savings spoke to business leaders that have run small companies themselves. They wanted to learn what SMEs are wasting their money on ? and what they can do to change that.
Buying space before it?s needed
Ambition is great for any business. Having a clear vision of how you want to grow often gives you the tenacity to push through and achieve that aim.
Too much ambition, though, can become a problem. For SMEs, that comes in the form of buying space in anticipation of growth that isn?t guaranteed.
?SMEs can lose out on profitability if they commit to office premises too soon,? says Kieran Hart, MD of Virtual HQ.
?It?s not only renting that?s costly. It’s all the other components that follow; such as transport, telecoms and utilities.
Consider whether you need as much space as you have.
Making bad hires
A bad hire is one of the costliest mistakes you can make, especially in the early days of your company.
Darren Hockley, MD of eLearning company DeltaNet, highlights the mistakes that SME’s make when it comes to hiring.
?The pressure on time can often lead to rushing the recruitment process and taking the ?best of an ill-fitting bunch?.?
?Often it is better to wait to get the right person. Rushing to recruit the wrong person might mean they take longer to come up to speed. They might leave quickly, so you have to start the process again.?
That?s not to say SMEs are stuck until they find the perfect hire. Here?s how you can improve your hiring process without breaking the bank:
- If you need expert work done in the short term ? like setting up a website ? outsource it to the pros. By the time recruitment costs and benefits add up, it?ll be far cheaper to go to a third party instead.
- Hire part-time staff for a role that isn?t big enough to justify taking someone on full-time for.
- When hiring full-time staff, strike a balance between excellence and efficiency. A small business might take a graduate that’s talented and keen for experience, but who?s not as costly as a veteran.
- Incentivise referrals from staff with a finder?s fee. Not only is it cheaper, your team will put forward people they know are good because it reflects well on them. Use recruiters as a last resort.
Branding agencies can sell you the dream, especially if you?re new to running a company.
Many business owners have found that focusing on branding too early on can be a waste of resources.
Kalina Halatcheva, founder of Nouri Health, has learned this first-hand. ?The opportunity to attach to glamorous events and my dream target audience have cost me a lot of money. Looking back now, it looks like such a waste!
?Brand image and long-term goals are important,? she says. “Don?t let big names and promises for long-term success blind you. For SMEs, the bottom line at the end of the month (not the year!) is what you should be looking at and controlling.
Instead of branding, focus on making the quality of your work as good as possible first. Recommendations from happy customers are more likely to grow your business than a logo or mascot.
Advertising (the wrong way)
Advertising and digital marketing are both important if you want to create a brand that people flock to. But it can be a mistake for businesses to jump in too early.
Charlotte Sheridan from The Small Biz Expert warns against using things like Google Ads if you don?t have the experience.
?Many business owners adopt a ‘set up and leave it’ approach. This can cost them dearly if they are not monitoring the search terms and aren’t checking ROI.
“We have seen examples of companies spending hundreds of pounds per month on a keyword that is a broad match and doesn’t relate to their services.?
But advertising can be powerful in the right hands. Here are a few ways you can utilise it:
Ensure your product is as good as it can be. Nothing will kill your brand name faster than a bad reputation. Word of mouth and bad press spread like wildfire.
Find the channels that will be most effective for your target audience. If you sell accounting software, Instagram probably isn?t the best place to promote it. In the same way, you wouldn?t take out a two-page spread in the Times if you sell fashionable oversized hoodies.
Hire an expert. Whereas pay-per-click (PPC) advertising will provide you with a much clearer ROI, it can be costly if you don?t have someone who can manage your ads account. Have an expert run your campaigns for you. You?ll lose far more on a runaway ad campaign than you will by paying for someone to manage your ads the right way.
Paying too much for business energy
8 out of 10 businesses are paying too much for their energy, even though they could switch to a cheaper tariff.
Phil Foster, CEO of Love Energy Savings, said: “It’s inevitable that bills will continue to rise. You can remain in control of your bills by finding a comprehensive deal that fits your budget. Failing to review your bills and find a tariff that offers you the best value for money can have a significant impact on your company?s bottom line.?
Businesses can save over ?1,000 a year by switching their energy tariff online. Other simple ways to avoid unnecessary spending include:
- Using energy-efficient appliances. A small business will use about 20,000 kWh of energy each year. When you consider that using incandescent bulbs could cost up to ?11.70 more per kWh than fluorescent bulbs, it adds up. It?s also important to ensure any equipment and appliances you use are as efficient as possible. Switching to energy-efficient appliances can save you a lot of money.
- Switching things off. Turning things off when they?re not in use is one of the simplest but most effective ways of cutting costs. By switching computer monitors off when leaving the office, you can save up to ?56 a year per computer.
Stop wasting, start saving
The spending habits of a company often come to define whether it?s one that sinks or swims.
By taking the advice of business leaders that have experienced bad spending first-hand, you set yourself up to succeed. This is due to getting in control of your finances and supporting your future.