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5 Penny-pinching Sins to Avoid
By: Sean C. Castrina
Posted: May 30, 2014, from the June 2014 issue of Skin Inc. magazine.
The ability to stretch a budget is a survival skill, especially in those cash-strapped early days. However, if a spa owner’s goal is to cut costs at any cost, she’s heading into dangerous territory.
Avoiding unnecessary expenses is one thing—becoming a fear-driven perpetual penny-pincher is another. Cheapness can hurt the value of a business’s products or services, or the efficiency of your business, both of which will drive clients away.
Subject every prospective cost-saving measure to this litmus test: What are the possible short- and long-term effects of this decision? Will it save my business money without negatively affecting profits? Sometimes, the answer is “no.”
Following are five penny-pinching sins that may be costing skin care facilities big.
1. Paying employees the bare minimum. This sends a very clear message: “I place a low value on you and your place in my company. I don’t see you as a person with talents and unique abilities, but as a debit on my monthly expense report.” This message sends skilled individuals running for the hills, costing more in lost productivity, turnover and client dissatisfaction.
Answer this: Would you want this person working for the competition? If not, pay them well and keep them on your team.
2. Using an in-house bookkeeper. Too many small business owners do bookkeeping in-house. Why is that a problem? First, many owner-designated bookkeepers don’t completely know what they’re doing. For instance, they may use unnecessarily broad headings or classify items incorrectly. Sooner or later, an accountant—or worse, the IRS—will charge to correct these mistakes. The larger problem is that it’s easy for an in-house bookkeeper to steal from the business.
3. Skimping on legal services. For general matters, hiring young, new-to-their-firm attorneys whose rates are low and who are really trying to make their way is OK. However, for matters in which a company’s survival is at stake, hire the best lawyer possible.
4. DIYing branded materials. “You have one chance to make a good first impression.” This advice is heard over and over again, but too often, business owners forget it—to their detriment. The fact is, clients are always going to judge businesses by their covers, which makes it invaluable to hire professionals to brand your skin care facility.
5. Relying on word-of-mouth marketing. Have you ever heard of Budweiser? This, of course, is a ridiculous question. Everyone has heard of Budweiser. Among many other details, the company produces an endless stream of expensive, Hollywood-quality commercials just to remind consumers of the well-established fact that it sells beer. The point is, no matter how successful they are, great companies are always trying to communicate with and attract potential customers.
Although client referrals are very powerful and can really help drive a business, if an owner tries to save money by not budgeting for marketing, they’ll save their way right out of business. It is a necessity to spend money to attract new clients.
In business, you get what you pay for. If spa owners skimp on something that affects the experience their company offers clients, or that compromises its ability to run efficiently, their efforts will probably backfire. As an entrepreneur, it’s beneficial to be frugal—but it really doesn’t pay to be cheap.
Sean C. Castrina is the author of 8 Unbreakable Rules for Business Start-Up Success (Champion Publishing, 2013). He is also founder of www.newbizcoach.org. A successful business coach and a true entrepreneur, Castrina has started more than 15 successful companies in the last 18 years.