We all know the old saying, “it takes money to make money.” To a certain extent, this is true. We need office space, sophisticated software and tech tools, and a little extra cash for travel and meetings. But how much is too much? And are your expenses justified?
When business is good, it’s easy to excuse away that $395 a night hotel room for a conference or that $250 “happy hour” you picked up for colleagues. But how much do these expenses contribute to your bottom line?
The answer to this begins with a self-audit. Create a spreadsheet of all your expenses. Mark those that are absolutely necessary (i.e. cell phone, internet, car/gas, etc.). While these expenses may not be negotiable, the cost of these items could be. A simple call to your phone or internet provider can typically yield some ongoing savings.
Next, analyze your secondary expenses. These are all the coffees, lunches, dinners, happy hours, hotel rooms, sporting event tickets, charity functions and more. Expenses of this nature should actually be part of your prospecting process. You’re already (hopefully!) tracking your progress with potential clients, but you should also be tracking the expenses associated with these leads. This would allow you to analyze, for example, that you obtained valuable leads that converted into clients seven times out of 10 when you attended a sporting event with colleagues, yet have yielded no viable leads when you attended drinks after work.
You can break this down even further for individual clients. Perhaps a prospect was courted with a coffee meeting, became a client after a lunch meeting and resulted in a few referrals in the year after you attended a basketball game together. It would make sense, then, that this is a loyal client worth investing in.
It’s great to think every dime spent on “business” was for a valuable cause – the pursuit of more business! However, it takes a true professional to execute an unbiased look at what they spend, on what and whether that resulted in an increase in business…or not. You don’t just want your business to be in the green, you want that line to be so far in the green that the little red slit is barely visible.