Stop playing Santa- you’re in the business to make money

Words like “corporate responsibility” and “business conscience” have become quite the buzz of late.  Many people think that businesses have become too selfish and that, in their pursuit for profits, they should also give something back to society.  Now that all sounds good if you’re Bill Gates or Sir Richard Branson and can afford that level of generosity.  But what if you’re a small business owner just starting out?  How far should, or can, you go when it comes to being generous?

Many small businesses make the mistake of giving too much.  So much, in fact, that it ends up negatively affecting their bottom line.  In order not to let that happen, you need to have a healthy balance between profitable activities and generosity.  Here are some key mistakes that many small businesses make on a regular basis:

Free information.  Yes, it is important to provide people with information about your company, especially if you’re just starting out.  Therefore, many small businesses regularly send out tons and tons of free brochures or information packages about the products and services they offer.  But does the amount of business brought in by them more than offset their costs?  Instead of sending these types of materials out randomly, it might be a better idea to selectively send them out to people who have specifically asked for such information.

Free samples.  Consumers love receiving freebies such as product samples.  But product samples don’t always convert consumers into customers.  Handing out product samples can become quite expensive if it is not done strategically.  Only make them available to your best prospects.

Donations.  Charities will come knocking on your door to ask for donations at one point or another.  A certain amount of donations to charity are always tax deductible.  But you are not Oxfam and you need to limit your donations to a few selected charities.  Learn to say no once in a while.

Employee perks.  In a small business, especially if it’s a family business, the culture of paternalism is very strong and employee loyalty is highly valued.  Therefore, when times are good, business owners often reward the employees that have stuck with them by giving them huge pay raises and bonuses.  But what happens when times get tough and such employee perks are no longer sustainable?  What if sustaining them means your profitability will be in the red?  When rewarding employees, make sure that you have the ability to sustain those rewards even when business is slow.

When charitable acts start to eat away at your profits, they become bad business practiceA.  Be prudent with your generosity if you are still trying to get your business off the ground.  If you go out of business, you won’t be in a position to help anyone at all. So stop playing Santa, and focus on the profitability and sustainability of your business.

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