The less expensive option is not always the right choice for entrepreneurs. There are times when it pays more to fork out a little extra cash. Obviously, when you are first starting out, choosing options that fit within your startup budget is the way to go and will keep your business afloat.
But keep an eye out for the following circumstances where you might want to rethink the productivity and efficacy of your spending strategy.
Business Insurance
There are many types of insurance plans that a business might decide to purchase to protect themselves. From property insurance to workers' compensation insurance, to professional liability insurance, and product liability insurance. Just be careful. Purchasing the cheapest liability insurance policy might not help you at all when a client sues, or things take a nasty turn.
One thing that is true of all insurance companies where you're trying to collect money?
According to Springfield personal injury lawyer at Noll-Law.com,“The insurance adjuster does not work for you. They work for the insurance company, and their job is not to make sure you get the most money. It’s the opposite, to make sure you get the least amount of money.”
Do background checks on insurance companies when their insurance policies look too good to be true. It could be that their cheap policy won't serve to provide sufficient coverage for your needs.
Outsourcing Work
Need help but aren’t ready to hire a full-time employee? Or perhaps the work you need doing is a one- off task and does not require someone on your monthly payroll?
Outsourcing work is a wise financial move when your business is in its fledgling stages. But choosing the cheapest options on the market will likely run you into trouble.
Yes, you might find the rare individual who is highly talented and whose services are under market price because he or she is just starting out. But for the most part, highly talented, skilled, and experienced individuals know their worth and will charge for it.
A lot will depend on the type of task you outsource for your business organization. For example, if you need someone to do "busy work" type tasks, then a mistake made in that area will likely not hurt your business too much. On the other hand, business and social media strategies who provide poor advice can set your business back both in terms of finances and in time spent on non-productive leads.
Research what the market average is for various roles and be wary of services that offer cut-throat prices.
Setting Employee Salaries
Has your business expanded enough to require full-time workers? Congratulations! What should you keep in mind as you write up your job description and list a salary?
Set your entrance salary too low, and you will not attract the right type of people who will help your business grow. Additionally, keeping your employees for the long-term will be difficult, as they will likely jump at the next higher paying offer.
Naturally, you do not want to overpay or pay more than your business can afford. But salaries are investments in your business. The amount of money you put into your employees' pockets (if you choose the right person) should return to you in a stronger, faster-growing business. Which in turn means more profits for your company. Invest too little? And your returns won't be much to look at.
Want to hear a good question that Entreprenuer.com suggests small business owners ask themselves? "What is the money revenue this person could potentially bring to my company?" Your answer to that question should help you find a salary figure that you and they are happy with.
Paying Yourself
It can be tempting for business owners to put their personal finances at risk to help their business succeed. But in the long run, this can have a detrimental effect, not only on your company's financial stability but on your stress levels and peace of mind.
If you are involved in the day to day running of your business, you should be paying yourself a salary, too.
There are various considerations when it comes to the best way for small business owners to receive compensation for one's work. Depending on your business type, it might make more sense for you to get a payout in dividends. But the important point here is that you do enjoy the fruit of your labor and that you aren't investing all the profits right back into the business.
Even though you want your business to succeed, take a page from the stories of the best entrepreneurs out there. Your success should never be at the cost of your personal stability.
I hope you enjoyed this article about why it pays for frugal entrepreneurs to pay up.
Interested in more articles about managing frugal finances?
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