As a small business owner, I get it. Every dollar we spend has to be calculated. We don’t have a lot of cash to spend so we learn to be as frugal and self-reliant as possible. With that said, I have learned that there is a big difference between being cheap and frugal, a difference that leads to success or failure in any size business.
As small business owners, we must dance the fine line between hoarding what little cash we have and spending enough on necessities to keep our business afloat. The problem with this frame of mind is that it leaves absolutely no room for anything other than maintaining the status quo. Furthermore, the status quo is a myth. In business, there is either growth and success or your sales are falling, leading to business failure.
How does one master the dance of business frugality without falling into the trap of just being too cheap to succeed? The first step is to understand the difference between being cheap versus being money-wise (frugal). At first glance, you may think I am simply playing word games, but there is a huge difference in mindset and mentality between being cheap or frugal.
I have learned that there are three primary characteristics of the cheap business mentality that lead to a failing business. Unfortunately, I have learned these the hard way, through experience…hopefully, you can learn from my mistakes.
- Cheap business practices always put you on the defensive. Perhaps the biggest issue with the cheap business mentality is that you constantly see anyone trying to sell you a product or service as the enemy. First off, it is never a smart business practice to treat other business owners and sales professionals with disdain. They’re simply trying to make a living just like you, and whether you want what they’re selling or not, they deserve your respect as fellow business professionals. You never know who may become an ally. I have gotten countless referrals from salespeople who I never did business with, simply because I treated them with respect and built a relationship. Secondly, and I will make this quick; if you let your guard down, just a bit, you may find that what they are offering is exactly what you need…just a thought…hey, it could happen.
- Cheap business practices keep you focused on all the wrong things. I have said it before, but I will say it again: the purpose of business is to make money. The cheap business mentality changes that purpose and causes us to focus more on not spending money, as opposed to doing what it takes to make money. If our sole purpose as business owners is to not spend money, we end up focusing on all the wrong things. Our time is spent trying money-saving activities when we should be focused on maximizing our money-making activities. We struggle to find time to do everything ourselves and end up with no time to actually build and grow our business.
- Cheap business practices lead to an “if only” and “poor me” mentality. “If only I had the budget of the big business industry, then I would be successful.” “You just don’t understand. I know all the right things to do, I just don’t have the money to do them.” I can’t tell you how many times I have caught myself saying such things. In truth, I think I would be a lot more successful today if it were not for such lame excuses. Cheap business practices ultimately lead to the blame game. We blame the economy, our staff, our government, our circumstances, the rich, even our family life on our lack of business growth. We look to anything but ourselves to yell at for our lot in life.
A Frugal Business
A frugal business is something different entirely. Instead of focusing on how not to spend money, a frugal business owner focuses on how to spend money wisely. Yes, the fact is that small businesses have limited resources. The question is not how to never spend those resources, but rather, how best to spend them. For the sake of consistency, below are three qualities that make up a frugal business mentality. Also, because I know time is money, I will be quick with these, and simply list the qualities without extra commentary. I think they’re self-explanatory anyway.
- A frugal business mentality puts resources (money) to work.
- A frugal business mentality looks for ways to spend money in order to maximize profits.
- A frugal business owner knows the value of investing in their future and looks for ways to free up their time, improve their products, increase their efficiency, and grow their market share.