When you are running a business, it is important to keep an eye on the bottom line. Many investors fail to look at where their money is being spent every month. Getting a check at the closing is nice, but that is not what matters. Your goal is to keep as much of that money as possible. If your expenses are out of line, you will be very disappointed with the results. You should be monitoring every cent that comes out of your account every month, as it will impact your businesses’ profitability. If you treat investing like any other business, you will focus on keeping your costs down.
Not every expense is a bad one. There are many examples when you have to spend money to make money. A good exercise would be to track every dollar that goes out of your account for 30 days straight. You may be surprised at just how much money is essentially wasted every month. If you can trim the fat on these accounts, at the end of the year you may be sitting on a pretty substantial amount of money.
Materials, commission, lending fees, dining and even gas should be thrown into the mix. In business, there is a tendency to stick with what has been done in the past. If you have used the same attorney or lender for years, you may not even be aware that there is a more affordable way to do things. The same goes with marketing, lead generation and every other expense you make to get business. Just because you have done something one way in the past doesn’t mean it is the best way. The money you spend on everything you do will impact your bottom line. This can ultimately lead to you not being able to get a deal or not doing the work you would have liked to because of a lack of reserves.
Being savvy with your money does not mean you have to be cheap. There is a fine line between paying to take care of the people that make you money and trying to pinch pennies. If a contractor, realtor or attorney has been good to you and you know you can count on them, you need to take care of them. Where you can save your money is seeing what expenses you have made that are making you money. If you go to lunch with realtors three times a week and haven’t received a deal from them, this strategy isn’t producing any new business and you should reconsider how you target them. The bottom line is that if you don’t know where your money is going how can you know where to save?
Investors will constantly strive to get the lowest possible purchase price on property they buy. The same approach should be taken with every expense you make. Take the same time to do your due diligence on website hosting, direct mail leads, interest rates on credit cards and other often overlooked items. Every expense you make adds up and matters at the end of the month. Keeping your costs down is one of the secrets in running a profitable business year in and year out.