How Frugal Business Owners Spend Their Money

Savvy Business Owners Know What They’re Spending

Smart business owners spend their money with intention. Because it’s their business, they pay more attention to what they’re spending money on, how that money is bettering their business and whether it is necessary for operating their business. If times are tight, they may be focusing on how much money is required to keep the lights on for their business.

I’ve heard many business owners call this (the amount they need to spend to keep the lights on) their “nut”. Depending on what business you’re in your nut might be very different from another person‘s business nut. If you own a restaurant then rent or mortgage on your space, payroll for employees, and payments for inventory like food are absolutely necessary. If you are a solo contractor, then it may just be your personal expenses that are absolutely necessary. You need to keep the utilities on at your house, the internet bill paid and the rent paid so you can keep operating.

Intentional Spending Is Key for Frugal Business Owners

Frugal business owners know exactly what they need to keep their business going. I’ve often heard them call anything outside of the keeping the lights on nut discretionary expenses. Discretionary expenses could be pizza Fridays for your employees when things are going well or bonuses at year-end for key employees. Or they could be having an administrative assistant who helped you run critical functions for your business, but in a pinch you could take on that work yourself and skip that cost. I will say though, there is something fundamentally dangerous about doing everything yourself all of the time. And for you in your business, factoring in what kind of manager you want to be, that administrative support might could be part of your nut or it could be part of your discretionary expense.

One of the harder things to determine from any business owner is what falls into necessary versus discretionary expenses. But that is a much longer conversation (maybe one for a future blog!). The most important thing is to know what you are spending money on and be intentional about what you spend money on.

Budgets Help Frugal Business Owners Spend Money With Intention

Building a budget using your current expenses as a base for that budget can really help you spend with intention. There may even be expenses that build up over months or years of time that just get away from you. So the process of reviewing your expenses to build your budget can in itself be enlightening. It’s a great idea every so often, more frequently if your business is rapidly changing or growing, to review all of your costs and determine what are necessary versus discretionary expenses. I’m not saying cut costs, I’m saying to understand what is necessary to keep the lights on and what is a nice to have. This will help you react more quickly and with more intention if things don’t go well. It will also help you better understand what it takes to operate your business and where the money is going now and how you might spend that money in the future in order to grow.