12 Things Business Owners Pay Too Much For
Running a business is going to cost a lot whatever you do, but too many businesses spend unnecessary amounts in these areas.
Business costs are unavoidable, but some costs in business are way higher than necessary. Paying too much for rent, marketing or travel can cost your business its flexibility and reduce your working capital that helps get you through the lean months. Knowing where you can trim the fat will allow your company to run more efficiently and prevent you from feeling a pinch month to month.
We asked 12 entrepreneurs from YEC to weigh in on the most surprising things that business owners are paying too much for.
1. Credit card processing
"Business owners should regularly check how much their credit card processing fees are, and negotiate their rates. Often, when you do more volume, you can ask for a lowered rate. Processing is a competitive market." – Rachel Beider, Massage Greenpoint
2. Inefficient employees
"Payroll most likely takes up the largest share of expenses in a business. A small business owner should seek employees that are returning five to 10 times what they are getting paid, but sometimes employees are barely returning one times their salary. If this is the case, employers should consider bringing in more productive employees (even if that means paying more) or simply outsource to freelancers." – Alejandro Rioja, Flux Chargers
3. Large office
"Many businesses spend more than they need to on renting office space. Additionally, they buy all kinds of equipment and furniture for the office. This can add up to thousands of dollars and recurring expenses. Consider if you could get by on a much smaller space or even a home office. In the digital world, paying for lots of physical space is usually not necessary." – Shawn Porat, Scorely
4. Web design
"Whether it's creating a landing page for your business, an online storefront or a web portfolio, chances are that you're paying too much for your website's design. The truth that many web designers and freelancers don't want you to know is that a professional-looking website can be made for next to nothing thanks to services like WordPress." – Bryce Welker, CPA Exam Guy
5. Content creation and SEO
"As someone who has been in the world of content creation, blogging and online marketing for more than 20 years now, I can tell you most people are doing it wrong. Even worse, many brands and businesses are paying way too much money on ineffective and lousy content and marketing companies. For some reason, businesses would rather overpay an agency than find someone who knows what they are doing." – Zac Johnson, Blogging.org
6. Ineffective marketing
"There is no dearth of entrepreneurs, startups and small businesses that don't know what marketing entails, and they're often at the receiving end of marketing companies out to make quick bucks. While impressive logos, websites, brochures and the likes are part of the parcel, not many companies focus on creating awareness, attracting attention and building relationships." – Derek Robinson, Top Notch Dezigns
7. Untargeted advertising
"Many businesses advertise without doing sufficient testing of the results. Placing ads – whether Google AdWords, Facebook ads or display ads in your local newspaper – is not always effective. If you're not carefully measuring the ROI, you could be wasting thousands of dollars per year. This is now truer than ever, as many people tune out traditional ads." – Kalin Kassabov, ProTexting
8. Video conferencing
"Back in the day, it might have made sense to spend a lot of money on a video conferencing room if you did a lot of business overseas. But these days, with tools like Zoom and Highfive, there are just so many less expensive options. There's no need to break the bank for this technology anymore." – Jared Atchison, WPForms
9. Document management
"There is no way that leasing a fancy copy machine and paying for photocopies should be a strong business model. It is, though, and the costs associated with these services are very high. To alleviate these costs, invest in good equipment, a paperless office and maintenance. Businesses do not win by leasing." – Ryan Bradley, Koester & Bradley LLP
10. Software development
"Software engineer salaries in major urban markets – such as San Francisco, New York and Boston – are approaching $200,000, or roughly $15,000 a month, for a fully loaded engineer. There are so many better options, especially since the adoption of Slack, Jira and other collaboration tools. Great talent can be leveraged for 30 percent of the price when considering nearshore markets (in the same time zone)." – Brian Samson, True North
"As business owners, we tend to see travel as part of the job – a necessary evil. But when you look at most trips taken at the company's expense and break down the ROI, cost and opportunity cost, I am positive you will find that your time and money would have been better spent staying put in your office and handling business from there. Working harder doesn't always mean that you're working smarter!" – Marc Lobliner, Tiger Fitness
12. Unhealthy habits
"A sick day for employees might be an excuse to binge on Netflix and catch up on sleep. A sick day for an entrepreneur forces them into never-ending catch-up as they reschedule meetings, deliverables and initiatives. Neglecting your health through poor eating, lack of fitness and general stress relief will eventually take you out of commission for days or weeks, which can be more costly than anything." – Ross Beyeler, Growth Spark
Scott Gerber is the founder of Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses. Gerber is also a serial entrepreneur, regular TV commentator and author of the book Never Get a “Real” Job.