Dead Weight Expenses Are Costing Your Small Business. Here's What to Watch for — And How to Cut Them Small businesses in particular can't afford to be poorly investing limited cash.

In business, managing with a steady eye on efficiency is pivotal, of course, yet I have seen a great many operations carrying unrecognized burdens — from being overstaffed to spending too much for services, from poorly investing sales and marketing dollars and operating too many divisions to focusing on channels that don't have a material payback.

How to assess your own enterprise — particularly with respect to growth prospects — in order to determine if there's pruning to be done.

Types of dead weight

Strategic: I use this phrase to encompass investing resources in a way that's either not driving ROI or becomes a distraction to more profitable areas of the business. This could take the form of supporting too many brands, divisions, products or sales channels. Collectively, they take focus away from real core competencies or most profitable product lines.

Operational: This category refers to running a business inefficiently. That could mean supporting a staff too large in relation to true company need, renting an office bigger than necessary, paying more for services than the market rate or, worse yet, paying for services you effectively aren't using at all.

Investing payroll dollars in people not driving enough sales to hit goals (and/or cover their costs), or advertising dollars into campaigns not driving a profitable return on spend, is simply a killer. So, religiously study sales and ad teams' performance, not just in the aggregate, but line-by-line for each campaign, in order to optimize and prune accordingly. It's difficult, but a habit must be made of re-investing in a way that doubles down on the true producers.

Related: 10 Ways Startups Can Pivot From Growth to Operational Efficiency During a Crisis

A strategic case study

When we acquired my current business, it was operating two brands, Restaurant Furniture Plus, which targets commercial buyers, and Your Bar Stool Store, with a focus on residential consumers. It seemed the right move, then, to build and maintain two different websites and marketing campaigns. After studying the financials by brand, we learned that Your Bar Stool Store was driving around 20% of revenue but only 5% of gross profits, as its average order size was $2,000, compared to $6,000 at Restaurant Furniture Plus. And there were additional operating inefficiencies in serving that particular consumer market, including more phone calls and a lot more claims and returns, all of which represented extra work.

At the end of the day, Your Bar Stool Store was break-even at best, so we decided to shut it down. This helped us to focus on more profitable commercial buyers, materially reduced operating efficiencies and perhaps most importantly, allowed us to reinvest precious dollars into the higher-performing business. The result was boosted revenue and profit. The "sacred cow" of the founders was sacrificed (as it were) to help propel the better business to newer heights.

Related: How to Ditch the Inefficiencies That Are Eating Your Revenue

Small businesses simply cannot afford needless drag on their resources. They must be nimble, operating at maximum speed and laser-focused on what will drive the most profits. Anything that gets in the way of that goal needs to be carefully examined, and quite possibly sacrificed, regardless of the emotional investment or sunk cost. This may result in some short-term pain, but trust me — the long-term payoff in focus, efficiency and profits will mend those wounds.