Purposeful . Profitable

Frugal vs Cheap Practice Owners, There’s a Difference.

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Sabrina Pelech, Profit Catalyzer


When a business owner starts to examine their operating expenses, it is not uncommon to start thinking you are spending too much and that the only solution is to hack away at expenses and close the purse strings as tightly as possible.

The last thing you want to do is become a cheap business owner where you start compromising business effectiveness and efficiency in the name of saving a buck. While you may save money here and there you really don’t know how much are you losing in lost revenue and productivity from buying a cheaper subpar solution?

That does not mean you cannot be a frugal business owner, where you evaluate what expenses can be cut while maintaining efficiency and productivity and make decisions based on how essential it is to your business rather than on price.

Here’s a few ways to help you determine if you are a Cheap or Frugal Business owner.

“A financially healthy business is a result of an economical business owner spending money wisely on products and services that help achieve their goals vs a cheap business owner that makes decisions solely on price.”

1. Cost vs value

This is the first sign of being cheap vs frugal, if you are not willing to entertain a possible solution simply because of its price you are most likely acting cheaply than frugally.

A frugal business owner will evaluate the problem they are trying to solve, determine what features will help solve that problem and then review their financial plan to determine how much of their operating expense they can allocate to this purchase.

Then a frugal business owner will determine a budget range the low range would be the most likely outcome or what they consider to be a reasonable market price. As well as a max budget amount that they can spend up to but not over.

A Frugal Business owner will then evaluate all possible solutions within their price range to determine which ones check off the most problem-solving features and will make a best fit decision rather than a price decision.

Its unfortunately but many cheap business owners will miss out on great opportunities just because they were not open to spending even just a few dollars more on the right solution.

2. Not Considering Others

There are many ways to cut expenses and save money some are better than others. But most business owners agree that cutting expenses at the expense of staff can be detrimental to productivity and moral.

Let’s say you are looking for a new management software for your business and you are evaluating 2 options, one is easy to use and streamlined and the other is a cheaper option that is harder to use.

A cheap business owner may decide to purchase the cheaper soultion even though its harder for the staff to accomplish their job. Negatively effecting productivity.

While a frugal business owner will choose the streamlined option in favor of a productive staff.

Another example would be if you own or rent an office space and are responsible for paying utilizes such as air conditioning and heating.

A cheap business owner may set office temperatures to an uncomfortable level simply to save money. Even though this may negatively affect the moral of your staff.

Frugal business owners may make minor adjustments to the thermostats while keeping the room temperature comfortable in favor of team moral.

3. Falling victim to freebies

Cheap business owners don’t want to spend money regardless of the potential impacts. As a result, they are constantly on the hunt for free items and unbelievable deals.

A cheap business owner may choose to piece mail a solution together using 3 or 4 different free software versions rather than paying a sum on money each month for a single all in one solution that can drive staff productivity.

While frugal business owners like to find good deals and free items, I mean who doesn’t, they’ll invest their money in a solution that makes their businesses run most effectively.

4. Short and long-term thinking

Cheap business owners tend to only think about short term wins such as saving money now rather than the potential long-term gain.

A frugal business owner will consider the long-term ROI of an expense and will spend more now to increase productivity and revenue in order to achieve the long-term gain.

Such a decision could mean they are missing out on great opportunities.

5. Spending priorities

Frugal business owners operate using a budget and prioritize their spending. This means that they will opt to spend more money on the essentials and skimp on things that don’t are not as important while cutting outdated expenditures.

Cheap business owners don’t have spending priorities. Their goal is to get everything at the cheapest price as possible. Even if it means they must sacrifice quality to do so.

You shouldn’t be so fixated on costs that it adversely impacts your business. For that reason, it’s important for you to be aware of the difference between being cheap and frugal.

That’s where profit first can really help your business thrive by helping you determine a healthy Operating Expense budget while not compromising your profit account or owner’s compensation.

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