NFIB

Avoiding Impulse Spending in the Early Days of Business
04/ 01/ 2002

Starting a new business can be stressful, and it sometimes forces rational people to abandon their normal spending habits. There's a lot of stress attached to putting your ideas and dreams on the line and raising the money required for a company. It's extremely important to recognize the stress so that you'll avoid the temptation to overspend. Jeffrey Moses explains how in today's Workshop.

New business owners may find themselves overspending in the following ways:

1. Paying too much for office space.

2. Buying top-of-the-line equipment and furnishings, even when the absolute best is not required.

3. Purchasing high-end, slick, full-color brochures that contain expensive graphics.

4. Hiring too many employees before opening the business.

5. Purchasing too much stock or raw materials to take advantage of volume discounts.

6. Taking on unnecessary debt or acquiring debt at unnecessarily high rates of interest.

7. Buying too much advertising.

8. Purchasing or leasing a fleet of vans or trucks, rather than starting with one and building from there.

There are various reasons behind the emotional impulse to overspend when starting a new business. A person may feel highly optimistic, want to dazzle customers or want to give the new business every chance to succeed.

To avoid overspending, stick closely to the original business plan, which should always include detailed initial expenses. It's always better to put off impulse purchases, even if it's just for a few days or weeks.

When you have questions about your expenses, consult with your accountant or business adviser. In rare instances, spending a lot on certain aspects of your business may be a good idea. After your business has become more established and profitable, the emotional aspect of spending will be less. Until then, be extra careful -- you'll be glad you were.

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