If you haven’t already filed your taxes, you probably will soon. Looking at the bottom line and the “taxes owed” line for small business owners is always painful. When considering your business and personal wealth, you may want to review the wisdom of Epicurus, an ancient Greek philosopher who said, “Wealth consists not in having great possessions, but in having few wants.” In the realm of the small business, this means narrowing your scope of services and your related expenses. Here’s how…
When I first started working “independently” I felt I needed to know everything about my business and I needed to do it all myself. (I was so stupid — I can admit that now.) I have grown as an entrepreneur over the past seven years and I now know that I need to know more about less, not less about more to do well in my industry. It’s depth that pulls in the clients. They come to you for one thing — even if they stay with you for other services. Living the life of an entrepreneur and staying interested in the industries of your choice will give you the breadth without too much additional effort, but depth requires work.
Dig in and Gain Depth
- If you have a well-defined service list, you should also have a well-defined referral list.
- If you want to do only what you do best, you will notice that your cost to do business goes down compared to being a generalist because more time is billable and less time is research in areas you may only use a few times.
- To do just a few things really well requires less software, less hardware, less “stuff’ — which means less expense.
If you refer out the business you don’t consider your core services, you gain many advantages over the long-haul. You also stay efficient by doing what you do best. Those services that are your “core” are the ones you are most confident providing and are able to do quickest with the most enjoyment.
How Referring Out Work Builds Your Business
- Make professional friends with those who have complimentary specialties and nurture that network. It makes it easier for you to be the “one stop shop” if you know how to get the services your clients need — even when you aren’t the provider.
- Explain to the client that you are offering them better service by referring them to an expert in the fields outside of your own niche: “Joe, I’d love to help you with the spreadsheet, but my best area (as you know) is graphic design. If you let me turn this over to Sue, she can do it in half the time it would take me. She’s a spreadsheet whiz, and by doing it faster, it will cost you less. Let me help you save a few bucks!”
- You begin to get leads in your area of expertise from those to whom you refer and you gain a new level of trust from the clients you refer (they know you are keeping their best interests at heart, even if it costs you billable time.
- For you, it means never having to do that stuff you really hate again — and you can quit updating the software and the hardware required to do it. If you spend less, you make more.
Look at Software Expenses
- How much do you spend per year to update software (on the average)?
- How much of that software do you really use and which can you easily eliminate?
- If you had to select three primary software programs to run your business, what would they be?
- Are there viable open source software options to meet your needs for the other programs?
- Is it possible to use open source or online versions for even your most essential programs?
- How much would this save you per year, over the next five years — if you went with ONLY open source options?
If you can get over the fear of loosening your grip on the “big boy” programs, you could save hundreds (or even thousands) per year! I’m currently investigating a number of open source options for philosophical and financial reasons. And, I’m finding that some of the opensource options are outpacing my “big boy” programs in performance, flexibility, load-time and CPU usage. (How nice!)
Look at Hardware Expenses
Consider the optimum computer required to do your core services. If you currently have a desktop and a laptop, do you really need both? Could you possibly maintain just one? It used to be that you needed two, in case one died, so you didn’t have your entire business crash. A little planning with an external hard drive and cash socked away in the business account rather than spent on a redundant system means that if tragedy strikes, you can drive to the nearest computer store and buy a replacement in the morning and be working like nothing happened within a couple hours. And, it means that your “backup” system won’t sit there getting dated and aged while you run the other system as your primary. Daily external backups are amazingly liberating things!
- Portable computers are grand. I love them. But the “pro” of being able to take it with you also means that you probably WILL take it with you (which may be a “con”). Consider if you want to take work everywhere you go or if you want to be away from work occasionally and giving full attention to your personal activities.
- Desktop computers are cheaper by about 40% for the same CPU and memory — sometimes as much as 60-75% cheaper! If you have a single system, you have less to maintain. This means less time maintaining it and less expense keeping up multiple systems. But, if you tend to be mobile, they are terribly cumbersome.
- When you do buy computers, accessories and hardware make sure you really need them and that they are the best you can afford. Headsets, keyboards, phone systems and mice are a few of the items where I simply won’t skimp. They are too important and I work them too hard. I find that the “sweet spot” for computer purchases tend to be one model back from the “latest and greatest” currently available. That’s where the best prices are for the most power and features.
That’s where I usually buy when I replace my computer.
But, again, don’t buy more than you need. If you have trimmed down your programs to just the essentials, you will find that you need to replace your machine less often. And, remember, every year you can go without upgrading everything, is another year with several hundred (or thousand) extra dollars in your pocket.
Every year you should review your other expenses and look for ways to trim the fat.
- If you are a domain collector, quit it! Sell the ones you have or let them expire. Even at $10 or less per year, this adds up if you collect very many. Keep only those that are your brand, protect your brand or you actually plan to use in the future.
- Determine if your online business really needs a vast amount of “traditional” stationery products. If you do use them, be sure that you have only the essential information listed. This makes them more classic and less likely to become dated and useless.
- Invest in really nice business cards — this is not the place to go cheap. As an online business owner, this is the one piece of tactile, non-virtual marketing that you will use most often. Don’t overload it with information. Keep it simple, elegant and of the highest quality — just like your services!
- Make sure all your expenses are properly logged and recorded for the business. Don’t pick up little things when you are out and forget to charge them to the business and keep a perfect, complete mileage log for any business trips or errands.
- Unsubscribe from any magazines, online subscriptions and various annual fees that are not benefiting your business. If you aren’t using it, lose it. If it doesn’t make your life easier, it’s not worth the expense. All extras should provide real value.
And, as a self-employed entrepreneur, every dollar you save is one less dollar you have to earn and then pay 15% self-employment taxes on, income taxes, etc, etc. Once you reach a certain income level, making more doesn’t really benefit you — but spending less always will. Also, keep your eye on your tax bracket. Don’t put yourself in a position where you work harder to actually realize less money at the end of the year. That’s a painful discovery.
If you can trim your hardware, software and miscellaneous budget by a few grand each year… you have that much you can slip into your retirement account, which will lower your taxes now and help pave yourself a smoother future. And you have until April 15th to do that for LAST year!
“In most cases, when people make more money, they get deeper in debt. This is why money alone does not make you rich.” –Robert Kiyosaki
Above all, avoid going into debt for your business. Debt strips you of freedom and peace of mind. Spend less, budget and work hard, but do not owe.