This is a guest post from USA TODAY senior small business columnist Steve Strauss.
Although I was never the greatest law student, at the time, I was a little older than my peers, had some real-world work experience, and really liked it. As a result, I got a job with one of the top law firms in the country.
I seemingly had it all: a great job, good pay, impressive benefits, and so on.
The only thing was, I was miserable.
They don’t pay you the big bucks for no reason. Between the extraordinarily long hours and working for partners who saw nothing wrong with ruining weekends with extra work late on a Friday afternoon, I had to get out.
So I started interviewing other lawyers who had escaped the corporate grind and started their own firms. How do they do it? Where did they find clients? What was the secret?
It was then that I received one of the most important pieces of business advice I ever got, and that is saying a lot, given that I cull and share business advice for a living: “Keep your overhead low.”
I followed it when I started my first business (and all subsequent ones), and it was great advice for all sorts of reasons. I was able to withstand business disruptions far more easily, I didn’t fall for shiny and expensive pitches from salespeople and vendors, I was able to save, and as a result, I was able to grow responsibly.
It became my secret weapon, and apparently, I am not alone. According to SAP Concur and Oxford Economics in their paper “Managing SMB Growth: How Cost-Conscious Planning Helps Businesses Scale Up”:
“SMBs’ size may be a secret weapon for attacking some of the more pernicious problems associated with expansion, especially when it comes to budgeting. SMBs have to do more with less, and must be agile enough to anticipate changes or react quickly to the unexpected. Visibility and cost control are essential for growing businesses.”
Read that again: Cost control [is] essential for growing businesses.
The report goes on to say that one reason being cost-conscious is important is that it enables small and midsize businesses to scale smartly. According to the report:
“Generally speaking, these cost-conscious SMBs approach their expansions far differently – and see very different outcomes – than companies that say spending and cash flow were not important factors in their growth decisions. For instance, 93% of cost-conscious SMB executives agree they have the right platforms and systems in place to adapt to their growing organization vs. 79% of less cost-conscious executives.”
And the opposite is also true; SMBs that do not prioritize spending end up with a host of real-world problems:
- 59% encounter administrative issues
- 52% show an increase in travel and expense reporting
- 48% encounter issues with onboarding new hires
- and this is a big one – 45% have a problem with digital and cybersecurity
When I speak with SMBs about this topic, they are generally very afraid of “the B word” – you know, budget. But it really is pretty simple. A budget is your plan for what you want to do with your hard-earned capital. Would you rather spend it on a new marketing plan or paying off old debt? Voila! You are cost-conscious and have a budget.
Or maybe you want to open a new location. Can you? Your budget will tell you. That way, instead of dropping a lot of money on a risky idea, your thrifty budget lets you avoid catastrophic mistakes and grow smartly.
That’s what savvy SMBs do.
Learn more about cost-conscious businesses from the Oxford Economics report Managing SMB Growth: How Cost-Conscious Planning Helps Businesses Scale Up.