Business Spending vs. Saving

The Pros and Cons of Penny Pinching

A couple of years into the startup of my performing arts business, I spent a sleepless night agonizing over cleaning supplies. I had spent thousands on everything from disinfectant to floor polish for my new dance studio. We needed the supplies. With hundreds of students traipsing in and out of the classrooms daily, we had to keep the place clean. But I lay anxiously in bed and wondered, Did I overspend? Will the cans of Lysol and wood polish be my undoing?

I’m a big believer that entrepreneurs bring their personal financial philosophies to their businesses. Whether you tend to spend or save money, you bring those habits to your business. I’m lucky because my parents taught me how to handle money early in life, so I had a big advantage with my fiscal know-how when I started my company. That being said, hindsight is a wonderful thing. There are certainly instances when I wish I had spent a bit more.

As your business grows, you’ll have to decide over and over again whether to spend or save. I find the pro and con list to be a great benefit here, and I’ve outlined some assessment questions to get you started.

Saving Pros and Cons

This one happens to come easily for me. Saving is much more comfortable for me emotionally than spending. During my first several years as a business owner, I kept my “day job.” While the regular paycheck helped me build the business, the hours I put in both at my job and in my business were incredibly draining personally. I went through periods of self-pity as I watched friends and family go on trips I wouldn’t pay for because I felt compelled to put all of my money into my business.

Looking back, I realize I probably could have started paying myself a salary much sooner than I did. On the other hand, I’ve seen business owners take lavish trips or make big purchases only to later learn they’re living way beyond their means. Keeping your money in your business and living within your means is painful at first, but it pays off in the long run.

Saving Pros

  1. Your business will grow faster as you funnel capital into the infrastructure.
  2. You have the ability to make longer term investments.
  3. Your business will be more secure with a foundation of savings rather than a ream of credit card debt.

Saving Cons

  1. Your well-being or the well-being of your employees can suffer if you don’t spend enough to keep everyone happy.
  2. You may bypass growth opportunities if you’re afraid to spend on risk.
  3. Not using your credit at all can damage your credit rating, which you may need to acquire financing for expansion or access funds in an emergency.

Spending Pros and Cons

Now that I’m less afraid to spend some of the money we’re earning, I can see the advantages to not saving every penny. Our second location required a large investment—both of capital and trust on my part. Spending our money on expansion—as risky as it was at the time—turned out to be a good choice. Had I sat on that money, I’m not sure the opportunity would have been right down the road.

Spending Pros

  1. You can spend your money to achieve the vision you have for your business.
  2. You’ll be thriftier and wiser with your own money than with someone else’s.
  3. It takes money to make money, as they say, so investing in new product development or short-term marketing efforts become solid investments in your company’s future.

Spending Cons

  1. You may spend money on things you want but don’t ultimately need for the business.
  2. If you overspend, you will have to rely on credit to meet financial obligations and may end up in debt that threatens the vitality of your business.
  3. You will eventually spend money on the wrong things because you’re human. Regret is part of the journey.

What’s your money style? Are you a saver or a spender?

Please Share Your Thoughts!