Beware: Little Expenses and Hidden Costs!
As a small business owner, you only have so much time on your hands. For most business owners, it’s common to focus the vast majority of their time on the income-producing side of their business. For a martial arts school owner, this means generating and converting leads. Sound familiar?
Don’t get us wrong, you DEFINITELY need to have a constant focus on revenue…but in order to be successful in the long haul, you must also understand where your money is going. Whether you are struggling month-to-month, or fortunate enough to have plenty of profits rolling in, overspending and expenses can be taking a toll on your bottom line.
Without further ado, let’s take a look at some obvious (and not so obvious) places you might use to increase your bottom line:
1.) Rent
Unless you own the space where your school is located, we have a sneaky suspicion that rent is your biggest expense.
So, what can you do? Negotiation upon renewal is key. The pandemic has driven down the cost of rent in many cities all across the US. Want to learn more? Check out one of our recent articles, “4 Tips for Successfully Negotiating Rent Relief”
But let’s look past the obvious – an often overlooked aspect of rent? Capacity utilization.
Ask yourself, “How much of my space is actually being used to produce income?” Wasted or unused space is the silent killer of profits. Do the terms of your lease allow you to sublet? If so, a local fitness instructor or personal trainer may just be interested in subletting some of your space!
2.) Marketing
Don’t give into temptation – when looking to make expense reductions, marketing should never be the first place to look. After all, you can’t cut off the fuel to the engine and expect your car to keep driving!
When profitability is not where it should be, you need more leads, not fewer. But there is a difference between spending money on marketing and effectively spending money on marketing. If you want to learn about the nitty gritty of how to effectively measure your marketing efforts, read our blog post, “6 KPI’s Perfect for Martial Arts Schools.”
3.) Time
Did this one surprise you? Think about it this way – how you and your staff spend time is a cost. Not a direct cost, but an opportunity cost.
Each day we decide how we will spend our time. It’s all too easy to choose to spend it on the things we like doing, rather than the things we should be doing. We should always ask ourselves, “How much value comes from the time I spend on this activity?” Choosing to spend your precious time on low value activities is likely to cost you. If you spend your time on higher value activities, you won’t miss out on potential gains.
4.) Don’t Ignore Small Leaks
As the great Benjamin Franklin once said, “A small leak will sink a great ship.”
It may not be one single expense that is hurting your profitability. For the small business owner, it is often the “death by a thousand cuts” – or the accumulation of many seemingly small, insignificant expenditures. We’re talking office supplies, soap for the bathrooms, snacks and water for staff and students, etc.
If you want a better insight into your school’s expenses, try this exercise: make a detailed list of everything purchased for your school over the next month. Add everything up and multiply by 12 months. It sounds simple, but you may be surprised by how the numbers add up. What if you could save 10% just by shopping around a bit more and making more economical purchases? How much more will this bring to your pocket come the end of the year? Making that list may just open your eyes to the way your school really spends its money.
5.) Payment Delays
Don’t click away – payment delays are an expense too! So…why? When you don’t get paid on time it can lead to overdraft fees, late payment penalties, and a lower credit score for you. Avoid these expenses by automating your payment process and follow-up.
6.) Never Commingle Business and Personal Spending
Your business spending and personal spending should always remain separate. Even if you reimburse yourself, mixing the two just adds complexity (and wasted time) to your business. And, come tax time, it could cost you!
In order to maximize the deductions available to you as a small business owner, you must be able to clearly identify and provide documentation for legitimate business expenses. Always using a separate credit card and bank account will ensure that you don’t miss anything and have clean and clear documentation for the IRS.
7.) EVERYTHING is negotiable!
Did you read the caption above? Read it again. Now, adopt this mindset.
From credit card fees to the chairs you need to purchase for your lobby, the price tag is rarely set in stone. You never know what discounts you may get unless you ask! Not comfortable asking? We totally get it. Lucky for you, there are lots of excellent books out there on negotiation!
Remember – these 7 categories are just a few of the places where you can look for hidden expenses. After all, the devil is in the details. We hope this article has not only provided you with some much-needed insight, but will inspire you to spend a little more time looking deeper into the leaks that are sinking your ship!