I am a max-for-the-minimum, champagne on a beer budget kind of girl. I love to get a good deal, especially when running my business. However, while entrepreneurs know that every penny counts when running your own business, sometimes your efforts to save money can backfire, costing you more in the long run.
Related: 5 Tips for Structuring Your Business New Business Like a Pro
Here are just a few of the places where you should not cheap-out in your business.
Just because your uncle Ira is a lawyer doesn’t mean he’s the right lawyer for your business. If he’s not experienced in contract law, he may defer to off-the-shelf contracts rather than create ones that protect your company’s unique interests. If he does not regularly handle business disputes, you could end up in court when you could get better results at the negotiation table. If he’s not familiar with technology development contracts, what you thought was your proprietary software could be used by a competitor.
In other words, Ira’s discounted fee of $100 means little if you end up paying $1,000 to clean up your legal issues later. Paying a lawyer to provide you sound, experienced advice and have your contracts done correctly up front can keep you from substantial costs in the future.
Professional accountants do more than keep your books. The real value of accountants comes in their ability to look at rows and columns of numbers, and read them like a professor of literature would read a Shakespearean play. They don’t just compute your numbers — they interpret them. They can spot potential areas of financial trouble, make sure that you take all appropriate tax breaks, avoid tax penalties, identify product and service pricing issues and point out opportunities for growing your business.
Related: Getting Rid Of Pesky IRS Penalties
I once had a potential client who used a “value” accountant for their multi-million dollar business. The company was mischaracterizing revenue and looked on paper liked they had a lot of profits, when they should have been booking their pre-paid revenue as a liability. Their margins weren’t high enough when the revenue was characterized properly. Their accountant never caught it — I did when reviewing their financial statements — and the company lost years’ worth of opportunities to change their business model, as well as an opportunity to exit the business.
When you see your accountant more as a partner than as a service provider, you’ve hired the right one.
3. Your team.
Your employees are critical to the success of your business. Their skills affect the quality of your products or services. And since they interact with customers, clients and vendors, they are the ambassadors of your company. You get what you pay for. Investing more money in your employees can help avoid damage to your business reputation.
If you need additional help in the future, you can bring in some entry-level workers, knowing you invested in a core staff with knowledge and skills to train them. In fact, fewer well-paid employees can often do the jobs of many lesser-paid ones.
Moreover, it is very costly, both in real dollars and opportunity costs, to retrain employees. Be willing to pay a bit more to hire and retain people with core shared values and great work ethics.
There are a number of companies out there that offer access to different technology and tech services, from programs to web hosting, at a discount. However, you often get what you pay for in terms of functionality and reliability when it comes to technology. And given that technology costs have come down for many of these services overall, beware of being too cheap with technology.
Related: When You Hire a Developer, Don't Settle for 'Cheap'
As an entrepreneur, your time is at a premium. Getting a deal is no longer a deal if it takes up too much of your time to earn it.
Don’t be penny-wise and pound-foolish when it comes to your business. Keeping a focus on cash flow is vital for any business. Choosing burgers over lobster for an employee luncheon might make sense, but choosing low price over high quality for the purchases and relationships that affect your business is just plain senseless. Your savings today can cost you big time in the not too distant future.