by Brian McKay

We all want to save money. Both in our entrepreneurial endeavors and in our day to say lives. We’re told that a dollar saved is a dollar earned. And once we get into the habit, thrift and frugality become surprisingly addictive. We get into the habit of challenging ourselves to find new ways to save costs. But while this is usually a noble pursuit, we must all be wary of the dangers of false economy. Making savings in areas of our operations that could be detrimental to our business goals and mission statement. And while we may all be eager to reduce overheads (especially given the current circumstances) it can create all kinds of problems when we don’t cut judiciously.

Image by Karolina Gabrowska via Pexels

A false economy mindset can slow down your business and keep you from fulfilling the promises that your brand makes to your customers. It can actually keep you from maintaining the operational excellence that will help you to grow your business. At best it can stall your business’ growth, and at worst it can cause your operation to crumble from within. Let’s look at some false economies that could cost your business far more than they save. 

Compromising on human resources

Your vision, your leadership and your creativity are what has brought your business to life. But it’s the efforts of your staff that translate your vision into reality for your customers. And when you cut corners in recruitment, it can only ever damage your relationship with your clientele. 

Recruitment is a long, costly and time consuming process. As such, you may be tempted to rely on freelancers and agency workers to avoid the overheads that come with salaried employees. However, this means that your customers will never enjoy the continuity of customer service that comes with a united team. Furthermore, your workforce won’t enjoy the same camaraderie that comes from working together as a team. And when employees don’t feel as though their work colleagues are also trusted friends, you may have more of an issue with voluntary turnover. Which can be extremely expensive. Outsourcing your recruitment may allow you to make savings without compromising the quality of service that customers expect from your employees. 

Compromising on quality of materials

The knowledge, skills and innate talents of your team members play a huge part in the customer experience that you provide. But the materials that make your equipment and products are also a key factor. Even a skilled dentist needs to go to a high-quality dental supply store to provide a first-rate service. Compromising on the quality of your materials to save a little money may compromise the reliability of the products you offer, and as such you may expect sales to dwindle.

Under charging for your products and services

Of course, false economy works both ways. Constantly trying to undercut your competitors on price could lead to problems with cash flow that prevent you from being able to properly invest in quality. Sure, throwing a quick sale can help you to liquidate assets quickly, while also helping to free up cash flow. But you still need to think about margin. Chronic under charging can lead to less perceived value in your goods and services as well as constant issues with cash flow. Create a product that’s worth paying for and consumers will pay for it. Even in times like these.