July 15, 2010, 6:00 am

Side Business Money Killers

by: MD    Category: Alternative Income
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I opended up the topic of small business around here. When it comes to starting a side business, we all face similar issues. Do I go as lean as possible or do I spend some money today to invest for tomorrow? Should I go to that conference next month or should I save up for a new printer? No matter which way your decision goes, today I wanted to look at some profit/money killers affecting small business:

Not being lean.

From business cards to high tech laser printers. There are many financial mistakes that will hinder the growth of your side business. I remember listening to a Seth Godin interview a ways back when he brought up how he used the corner print shop for the longest time. This really hit me. We all feel the urge to purchase a brand new printer, when in reality the corner print shop is just fine. Is your side business as lean as possible? Chances are that money is being spent on areas it simply shouldn’t be. Can you identify these problem areas?

Complex business systems.

Trying to outsource your Human Resources or investing heavy amounts of capital into IT infrastructure can kill your startup business. Investing thousands of dollars into an advanced business system will do you any good at the very beginning. When you first get started, your primary goal should be to solve problems. A complex business system will just create problems for you. These will be problems that interfere with you being able to solve problems for your clients. Once you stop solving problems for your clients, chances are that your business will cease to exist.

Office space.

It’s 2010, do you really need an office? Too often does a small business owner invest too much money into space to conduct business. The reality is that these days all you need is an internet connection to conduct your business. No longer do you need an office space with a personal secretary to handle your business matters. Now everything can be done from your living room, or the local coffee shop.

Outsourcing everything.

Outsourcing is important. Especially for those that have read the ever popular 4-Hour Work Week book. Outsourcing has become a staple of every business. Unfortunately, it has gotten to the point where new business owners want to outsource everything (from minor administrative tasks to mega projects).

Don’t get me wrong. I’m all for outsourcing mundane tasks, but where do you draw the line? How does one determine what to outsource? The problem is that it becomes difficult to distinguish. Once a small business owner realizes how easy it is to outsource certain tasks, there’s no telling how far they will go. Therefore, it’s critical to realize that outsourcing isn’t the magic formula for getting a small business off the ground. The key will never be fully known, but it won’t be as simple as passing off all of the work.

What other small business profit killers have I missed? What mistakes have you seen your small business make?

Image source: NYCEDC

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Comments

by: The Financial Blogger | July 15th, 2010 (2:50 pm)

interesting article. here’s how our startup stands according to these points:

not being lean:
– we use our own computer and printers so we didn’t disburse money to open up our company.
– however, we have a blackberry each but I think it is fully worth it. Having a iPhone would have been an unessary cost 😉

complex business system:
– we always try to keep it as simple as possible; a few excel spreadsheet on google docs and google calendar as reminder for tasks
– we try to do everything on our own and make it easy

office space:
– my basement is the perfect office space
– however, I find that sometimes, it would be easier to have an office in order to “really work”. on the other side, I would buy a condo, not rent an office.

outsource everything:
– we outsource simple task and only when we calculate that our time will be used to create more value then what we are paying for. Example: if we think we can generate $50 a hour, by paying someone to do a task of 1 hour at $30, it’s worth it 😉

Other money killers:
not taking the time to write a plan and taking too much plan to write the plan. those are 2 money killers for a startup 😉

Hey, leave us iPhone users alone lol! My friend tried justifying his iPhone purchase for his business needs. A few weeks in he confessed that the iPhone was the most useless business purchase because all he did was watch movies and go on FaceBook. He then switched to the
Blackberry.

Buy a condo– is there a specific reason that you would do this?

P.S. I find that I’m most productive in public places, i.e. a coffee shop or the library.

I would say that another very key aspect is reinvesting as much as possible. To me that makes the difference between a business that can explode and another that grows much much slower

Great point!! In your opinion, what is the deciding factor for most entrepreneurs that makes them take the jump or not?

No doubt the iPhone is cool…but it’s not a business tool 😉

I’d like a condo since I could build value instead of paying for a stupid rent 😉

I also like public places but I would not work there evryday.

Being lean is indeed very important. But there are those who overdo being lean and use almost every free program possible, sacrificing the quality of products or makes customer service really terrible. 😉

[…] The Financial Blogger shows us some of the biggest hindrances to dealing with an alternative income source: a side business. Taking these points into consideration may save a dying business, help you streamline one that’s already working well or help you get your new small business successfully off the ground. Just like raising a family, developing a business takes a huge chunk of your time and other resources, especially your finances. Create the perfectly streamlined business by using the principles mentioned in this article. […]

[…] you manage to avoid the common side business money killers, you can start to earn more money in your spare time. This additional income can be used many […]