You cost money
This one is important. You cost your business money. Your business pays you a salary. It has to pay your expenses. It might pay towards your pension in addition to other benefits-in-kind. Right?
Your business makes sales and incurs operational costs. You are paid out of the difference between the two. So if you let expenses get out of control, your business has less money to pay you and cover costs, and may fail in the short-term.
Now you might be thinking. Hey! In fact, I AM the business. It’s my skill and my time that brings in the money. I train and coach people and get paid for it. It’s MY business so that means that I can spend what I want.
If you are self-employed, this is a mistake that could kill your coaching and facilitation businesses in the first year. It is your money but technically-speaking, it’s not your money. It belongs to the business. You have to think of expenses like spending your company’s money – not yours!
Keep your feet on the ground
Here’s a true story. I once worked as a consultant alongside a guy called ‘Brian’ in California. ‘Brian’ did some work with Apple in Cupertino. I actually got to go and sit inside Apple Head Quarters at Infinite Loop with several of the product team for iTunes. Pretty cool. ‘Brian’ (name changed) loved the job but he certainly loved the ‘good life’ too!
Back then, ‘Brian’s’ business consisted of himself and his wife. He talked seriously about bringing me on board as some kind of Director but I was worried about his sheer, uncontrolled profligacy.
Because ‘Brian’ made all the decisions himself, there was no one to challenge them. First-class flights? Costly hotels for us in San Francisco and Austin? No problem. He took a $240 limousine to JFK when Uber would do. He actually laughed when I took the airport bus instead of the limo.
This guy acted like a millionaire. He wasn’t. He acted like he had a blue-chip business and an expense account to match. He hadn’t. Eventually, his small business let several people go. The plans for ‘European expansion’ never came to pass. The lesson: don’t be like ‘Brian’.
Scrutinise every item
The first place to start (so you don’t think like ‘Brian’) is to ask this question often: How can I help my business to stay open?
For starters, you can help reduce unnecessary costs. Start today to think of your business like a separate entity. It has needs and obligations. It is in need of pruning and weeding to pull out the bad stuff. Less costs. More prudence.
Scrutinise every expense as if you are spending other people’s money not your ownTweet
I have to put my hand up at this point and admit that I have (on many occasions) been a little too enthusiastic in submitting receipts to my own business. Coffee, taxis, all kinds of add-ons to make me feel ‘important’. Sure. but it all adds up…fast!
This attitude became a problem when I billed my first clients. I received a call from Simon an angry customer. What was this charge for and what was other this charge for? He kept his expenses low. Why couldn’t I? Who the hell did I think I was? He was right!
From now on, I want you to ask yourself if a client would pay this expense. If the answer is ‘no’, don’t expect ‘your business’ to pay it either. Scrutinise every expense as if you are spending other people’s money not your own.
Create a policy
One idea is to create an expenses policy. You might think: ‘but I don’t need an expenses policy’. You actually do. You can refer to it. It keeps you on the right track. It eliminates guesswork. if you bring on associates, you will want them to behave accordingly. Why should you follow different rules?
If you have a clear set of guidelines for travel expenses, office expenses, day-to-day operational expenses (a.k.a. ‘Opex’ ), this will help you think like the CEO your business needs you to be.
Think like the CEO your facilitation and coaching business needs you to beTweet
Businesses fail because they run out of cash. Its as simple as that. And the number one reason is bad cash-flow management. Excessive expenditure kills profit and damages your balance sheet. No cash-flow. No business. Any accountant worth their salt will will tell you that.
So when you are next tempted to spend money. Stop. Check your expenses policy. If buying the thing you want contravenes your own policy and you do it anyway, you’re kidding yourself!
Think before you click
One of the benefits of the age of Amazon is that almost anything can be bought with a card. At the click of a mouse, you can order something before you have a chance to reflect properly.
(I shudder when I think of the number of times I clicked first and researched later!)
There is no shortage of websites convincing you that you need what they sell right now. So having an expenses policy will help when you have to justify impulse purchases especially online.
I met Cindy in Laguna Beach at a great conference run by video-expert James Wedmore. Over the course of lunch, Cindy told me all about LeadPages and ClickFunnels.
She had also signed up for Kajabi and was thinking of signing up for yet another system. All these expensive monthly-recurring expenses but she hadn’t actually fully used a single one!
Cindy just could’t say ‘no’ to technology and new stuff . This is called ‘Shiny Object Syndrome’ or SOS. If you can’t stick to your policy, you’re going to end up with a bunch of shiny stuff you really don’t need and can’t afford.
Track every cent
Over the course of time, an inability (or lack of discipline) to control expenses will inhibit your ability to buy the bigger things your business really needs but can’t afford (thanks to you!)
I resisted buying a motorised stand-up desk for ages in 2020. I worried about the cost.
But when I added up all the unnecessary expenses, I realized that I could have bought two desks for that same amount and had some change left over.
In English, there is a nice expression. ‘Look after the pennies and the pounds will look after themselves’. When you master the small stuff, you don’t have to worry so much about the big stuff.
Create a spreadsheet with all your monthly debits. Now multiply them by 12 to calculate the annual cost to your business. If you are surprised or shocked, it’s time to cut back on expenses fast.
Your cash-flow is the life-blood of your business. You need to treat it with respect. Draining it with unnecessary expenses is going to have a negative effect pretty quickly.
24 dollars a month here and 20 dollars a month here seems like a small amount of money, But when you think what that amounts to annually, you will be amazed what you are spending.
Without intentional and systematic control of expenditure, you are doing your business long-term damage. If you don’t get a grip of your outgoings right now, there won’t be any long term to worry about because you’ll have no business.
One final question: If you still had a boss, would you have to comply with a company expense policy? Absolutely.
So, starting right now, think like a CEO and question every item and every unnecessary cost. Your business now depends on your ability to say ‘no’.
What are your thoughts on the best ways to control expenditure? Share below!