Business Part Of Life

Managing a budget is one of the toughest challenges small enterprises face, especially as new—and potentially pricey—ideas arise and unexpected expenses pop up.
So we asked The Experts: Where do small businesses waste the most money?
This discussion relates to a recent Journal Report article on cash-strapped entrepreneurs who seek early inheritances. and formed the basis of a discussion on The Experts blog on Aug. 21.

Joanne Chang : Spend as if It Were Your Own Money

From my experience, easy money is wasted—i.e., money that is not yours. If it is yours, you will watch every penny. Instill in your managers and those who have buying power to act as if the money is coming out of their own pocket to try and ensure they do their research and don't spend on things that your company really doesn't need. Money is also wasted when you spend on projects that have not been well thought out. Don't throw money after an idea just because you've already spent some money on it—cut your losses quick and don't let your ego keep you spending more than you should on an idea that simply wasn't right. For everything you spend money on, ask yourself how it will help your bottom line—if you can figure out a direct correlation, then it's probably worth considering. But if you can't, then you better have other equally important reasons for spending the money (i.e., charity, speaks to your values, etc.).

Joanne Chang ( @jbchang) is the owner of and chef at Flour Bakery + Café and Myers + Chang in Boston.

Mary Liz Curtin : Those Little Costs Add Up

Grand ideas and loose controls are the biggest problems. Before you make money, don't decorate the office! Every penny you spend, especially at the beginning, has to be watched. Often a person who has come from a big job has a little trouble adjusting to traveling in coach and staying in hotels with few or no stars, but if you own a business you have to be very tight with everything.
The small expenses add up quickly, so auditing basic costs, from travel expenses to utility costs, is essential. I have noticed that when someone says, "You have to spend money to make money," he is usually about to blow the budget for something that he cannot justify. All the little things can really add up, and it is very easy to let it get away from you.
Investing in the business wisely is important: Pay your people as well as you can, keep your inventory levels where they need to be, learn to buy for maximum margins and be sure you don't skimp on the things that are essential to your business, but weigh each expenditure carefully and teach your staff to do the same.
In our retail store, Leon & Lulu, my husband's unbelievable thriftiness has played a major part in our success and profitability. It is much more fun to spend money on a holiday dinner for the staff than see it slip away on wasted office supplies or high freight costs. We are penny pinchers and proud of it.

Mary Liz Curtin ( @marylizcurtin) is the owner of Leon & Lulu, a destination lifestyle store in Detroit.

James Schrager : Get Rid of Bad Hires Early

On people who turn out not able to do the work. The best hires surprise you from the moment they come onboard. Not with perfect work, but with their ability to quickly grasp essentials and respond. They also surprise you with how fast they can learn. If you don't see this early, you're wasting your money. It's never fun to fire people (except perhaps for Mr. Trump, who seems to enjoy it), but it comes with the job of being in charge.

James Schrager is a clinical professor of entrepreneurship and strategic management at the University of Chicago Booth School of Business.

Richard Duncan : Do What You Do Best—and Hire for the Rest

Many small businesses have owners working hard in their business but not on their business. It is imperative that you find staff support in your weak areas and the busy work to run your business (the things you just don't enjoy or at which you don't excel). You must place a high value on your time as a business owner and focus on what you personally do best and hire for the rest. For example, thinking that you're saving money by doing your own CPA work or cleaning the restroom are jobs that might be best left to others in order to free your time for what is important: building your successful business.

Richard Duncan is the president of Rich Duncan Construction in Salem, Ore.

John Jordan : Excess Inventory Can Consume Your Cash

Small businesses often deploy too much cash into inventory. Business owners underestimate the amount of cash they will need to adapt their businesses. The largest consumer of cash in most businesses is excess inventory. More often than not, it is preferable to trade a little gross profit for cash reserves.

John Jordan is chief executive officer of Sonoma County's Jordan Winery, a digital wine-list entrepreneur and founder of the John Jordan Foundation.

Sharon Hadary : Firms Overpay for Some People. And Underpay for Others.

Small businesses waste most money by spending too much or too little.
They spend too much money on bringing in expertise from the corporate sector in their industry. The temptation is great to bring in recognized, well-recommended experts in hopes of accelerating the business's growth. All too often, these experts' experience is primarily corporate and does not translate effectively to the entrepreneurial world.
In the same vein, entrepreneurs often invest in hiring senior executives from the corporate world, expecting that the corporate experience will transfer to the entrepreneurial world. It seldom does! After a year or so of trying, both parties realize it is not working—but the money already has been spent.
Conversely, entrepreneurs often spend too little on hiring for key positions. They believe they cannot afford to invest in experienced employees for critical areas. So they minimize salary expenses by hiring junior people with little experience. While some inexperienced employees may rise to the occasion, more often than not, by paying too little, the entrepreneur holds back the growth of the business. Finance is one of the key areas where small businesses often scrimp—hiring a bookkeeper rather than a financial analyst. Yet this is one of the most critical areas of the business. The money spent on salary and benefits for unqualified people is wasted. It is better to invest in a few highly qualified people.

Sharon Hadary ( @hadaryco) is the founding and former executive director of the Center for Women's Business Research and an adjunct professor in the Doctorate of Management Program at the University of Maryland University College, and has co-written a new book, "How Women Lead: The 8 Essential Strategies Successful Women Know."

Carol Ostrow : Three Ways to Stop Wasting Money

Paid advertising: The Flea Theater no longer pays for print or online ads. We do all of our advertising online and ourselves. We write our own message and use our company to disseminate.
Space and equipment: You don't need a big office, lots of computers or fancy phone systems. Your computer, your phone and if you are producing a play, a space to perform—even if it's your apartment or the empty parking lot on the corner.

Not staying on budget: Decide how much you are going to spend on a project and don't go over budget. If the set designer can't build for what you have, find another set designer. If costume changes are too many, pay the actors to use their own wardrobe. Don't ever be convinced that going over budget is containable; once you are over, it starts to spiral.
Carol Ostrow is the producing director of The Flea Theater in New York City.

source: http://online.wsj.com/news/articles/SB10001424127887324165204579026800332341822