This is a guest post by Merrin Muxlow of Resource Nation.
At some point, every business owner will be faced with a tough purchasing decision. Say you need a new POS system, have decided to outsource a key business function (IT outsourcing or payroll processing, for example) but aren’t sure where to start- how can you tell if you’re getting your money’s worth? When should you take advantage of a bargain? Too often business owners make the mistake of buying beyond their needs, spending beyond their means, or making purchasing decisions without considering all the facts. Here are the top 10 purchasing mistakes, and how you can avoid them.
1. Buying too soon.
Brand new businesses can usually get by on bare-bones equipment and upgrade as needed. A good rule of thumb: if you’re not going to use it tomorrow, don’t buy it–you might not really need it in the future.
2. “Bargains” that aren’t.
Purchasing heavily discounted software programs and industry-specific hardware, such as POS equipment (touch screens, scanners, etc.) at a liquidation sale or auction can seem like a great deal…until you realize that your “bargain” purchase isn’t compatible with any of the equipment you already own. Some deals really are too good to be true.
3. Impulse buys.
Don’t get talked into a purchase by an overzealous salesperson, or go on a new office furniture spending spree because you’re frustrated with your same old surroundings. Smart business owners only make strategic purchases.
4. Not negotiating.
You can negotiate a deal on almost any business service, and most products, too. Most phone systems vendors, POS systems salespeople, payroll services reps, and other vendors will often throw in extras, especially if you buy at the end of the month, quarter, or year, where your purchase will make the difference in their final sales numbers.
5. Not asking for references/referrals.
Always ask for references before making any significant business purchase, especially if it’s for an ongoing service. Ask other businesses for recommendations, and request reference information from prospective vendors- get a local reference if possible.
6. Skimping on research.
You should know a few basics before you start to shop: your price range, your basic requirements, the names of a few vendors, and how long the purchasing process usually takes. Don’t waste your time contacting vendors that only offer services for big companies if you’re a small business.
7. Being a know-it-all.
While research is great, getting your heart set on a particular technology or product isn’t always a good idea- you might miss out on an offering that’s better suited for your business. Be open to suggestions, even if you have a fairly firm idea of what you want.
8. Buying based on price alone.
The cheapest product or service isn’t always the best- or even the cheapest! For example, many payroll services vendors charge a very low per-check fee, but then add charges on for changing employee information or performing mandatory payroll tax deposits. Evaluate all costs to make sure you’re really getting a deal.
9. Not considering long-run costs.
Many business necessities can be leased or hosted (software, voip phone systems equipment, etc.) instead of purchased. This might cut down on the initial outlay, but will be more expensive overall. For example, many credit card processing companies sell processing terminals for a few hundred dollars, or lease them for $20/month or more- buying is clearly the better bargain in such cases.
10. Overextending yourself.
Even if a specific purchase is absolutely necessary, it might be out of your current price range. Overextending yourself is never a good idea- try buying a cheaper version that can be upgraded or even traded in as your business grows.
The most successful business owners know that good judgment and common sense can go a long way- Only buy what you need, do your homework, and don’t spend to your limits. Remember, a “good deal” is a purchase you’re satisfied with, no matter how much the actual cost.
Merrin Muxlow is a writer, yoga teacher, and law student based in San Diego, California. Merrin writes extensively for Resource Nation, an online resource that provides expert advice on purchasing and outsourcing decisions for small business owners and entrepreneurs. She frequently contributes to several sites and programs that offer tools for business owners, including Dell, BizEquity, StartUpNation, and bMighty.