Your Money is Your Business...Literally

Expense Management is a Key to Survival for the Small Business Owner

It is a very competitive business landscape in virtually every sector of the market; particularly hard hit by rising costs in recent years has been the insurance and financial services industry. The slightest miscalculation in spending valuable agency resources can result in a tremendous amount of harm to vital cash-flow needs and deplete precious capital reserves needed to continue operating the agency and meeting payroll demands.

As commissions (revenues) steadily decrease among most insurance companies along with increasing operating expenses, agents are seeking new outlets to acquire customers and access new streams of prospects to drive growth, achieve policy count increases and offset the challenge of higher operating expenses.

It all Begins with a Simple Choice

Expense management is not as complicated a matter as is often made of it at the agency level. In fact, when considered against the backdrop of some simple questions related to sales & marketing, controlling expenses is not a difficult process.

It is not the choice between one thing to spend money on and another that presents difficulty for most agents. It is the actual follow through on that decision, or the execution of the choice to spend or not to spend, that causes the most problems for agents and other small business people.

Making the choice between good and bad, wise and foolish, smart and…not so smart, are easy choices to make. But acting on those choices; now that is a different challenge altogether.

Expense Management begins with the Two Questions

1. Is the money I am considering spending intended to drive prospects to my business?

2. If not, does the money I am considering spending go towards keeping the business entity viable and operating effectively and efficiently so I can drive customers to my storefront and keep the current ones that I have acquired?

-If the answer to both questions is, no; then don’t spend the money…Or, if you feel absolutely compelled to spend the money anyway, at least, spend the money very slowly, deliberately…and very reluctantly.

-If the answer to either is, yes, then spend it…And, yes, spend it carefully and wisely.

Recognize that the farther you deviate from this two question standard, the farther away the business drifts away from profitability and solvency.

Expense management has to do with the discipline of follow through.

Can you say, no, to one expense and, yes, to another after applying the two question standard…and then actively follow through with the decision?

I am not begrudging agents and other business owners the liberty to spend their money on what they want. The freedom to make choices and decisions is one of the great attractions of being a business owner; and being an American for that matter. What I am suggesting is that agents take the time to consider their expenditures, and impulses, through the filter of the two question standard.

Impulses and Careless Spending can Lead to Business Failure

Many times, I have observed the unnecessary spending of precious business funds on things that are not relevant to the business goal. Blackberry phones, expensive pens and office items, unneeded office furniture and decorations, unnecessary and frequent business meals and excessive spending on office supplies to name a few are examples of expense traps that many agents can fall prey to when making spending choices.

And as a matter of record, it is oftentimes the small and seemingly “harmless’ expenditures that cause big problems for the agent owner.

Inevitably, the day will come when money is needed for an expenditure that could actually drive prospects to your storefront, but the funds will not be there to spend. Why? Because satellite radio and that Monte Blanc pen you wanted for the office to impress clients was purchased instead.

Logic could be used to justify the purchasing of all of the aforementioned items. But if squarely applied to the two question standard, and critically assessed in regard to their benefit to the overall success of the agency, the answer would be to forego those expenses. It would be wiser to spend the money on marketing & sales processes within the office that will have a direct impact on revenues and in lowering expense ratios.

Then when the day comes where you have adequate disposable income and the liberty to spend your money more liberally, then do so; enjoy the fruits of your labor. But for the agent, particularly for the new agent with tight tolerances for spending capital resources, be disciplined and deliberate in what you spend your money.

Freedom can Kill You…And it can Kill the Business…

Again, I feel it necessary to remind readers that your money is your business, literally. The ability to spend money and to make choices is a relative matter and a highly personal one as well.

Some agents have the fortunate ability to spend more than others on a variety of different things. Some agents have a very narrow margin of discretionary money, and are thus; more sensitive to cash-flow issues. This causes them to keep expenses strictly centered on profit and growth spending more so than the individual with a greater capacity for spending outside the boundaries of necessity.

Agents operating under narrow margins, which are most common, have no latitude for deviation from the two question standard. Still, the wonderful part of business ownership is the ability to exercise personal authority over the spending of money as you see fit. After all, it is your business, and no one else’s, especially when it comes to what you spend your money on.

But with the wonderful privilege of business ownership and the freedom of choice that comes with it, there can also be a curse brought upon the business owner. Freedom without self-discipline is a curse…and a killer; a killer of profit.

It is also a killer of production excellence, personal achievement, and a killer of many small business ventures in the end. Freedom without discipline soon leads to bondage and enslavement financially.

In regard to expenses and managing them properly as a business owner, there’s a certain discipline necessary that every agent-owner must exercise in order to adhere to the two question standard.

The answer to expense management issues is not the solution to the problem of expense management. It is the active adherence to the answer that is the solution to the problem…

The questions, once again, are this:

1. Is the money I am considering spending intended to drive prospects to my business?

2. Does the money I am considering spending go towards keeping the business entity viable and operating effectively and efficiently so I can keep current customers or drive new customers to my storefront?

The answer is going to be either, yes or no to either question. But the solution is not in concluding on a yes or no answer. The solution is in the deliberate, disciplined act of not spending when it is so indicated, or desired.

That is the discipline of expense management. Sounds simple in its basic form; that's because it is simple. But simple doesn't mean it is easy. The hard work is in the application of the answers; the discipline and determination to execute on the answers is the challenge and the magic to effective expense management as an agency owner.

After all, your money is your business.

Copyright © 2010 - Tony Cefalu