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3 Belt-Tightening Mistakes to Avoid

With the economic recovery sputtering along, it's easy to fall into the mindset that cheaper is always better. But even when budgets are tight, there's a right and a wrong way to save money.

Trim spending in the wrong places and you can end up hurting your business in the long run, says business strategist Carol Roth, a former investment banker and the best-selling author of The Entrepreneur Equation. Here are three of most common cost-cutter mistakes:

1. Cut back on customer service. When small business owners start to get panicky about their spending, one of the first things to go is often the perks and services that you lavish on your customers. That's the last place to trim, says Roth. For example, if you own a restaurant, it may be tempting to decrease the number of servers, therefore asking the remaining servers to handle additional tables. Don't do it.

"If you are cutting back in areas where your customer is going to notice, that is a mistake," says Roth. "Your best opportunity is to maintain or beef up in the areas that are going to impact the customer."

Related: A Checklist for Strategic Cost Cutting

2. Chop the marketing budget. Another common knee-jerk reaction of an anxious entrepreneur is to slash the funding designated for marketing. That won't affect your core business, right? Wrong. Eventually the economy will recover more robustly and customers will be willing to spend more freely. If you cut back on your marketing spending now, you are cutting yourself off from the new customers that will grow your business, says Roth.

Also, down periods in the economy are ripe for expanding because the rival business down the street has probably had the same impulsive reaction and reined in its marketing budget. "You don't want to pull back in an area like that, especially when your competitors are doing that, because that gives you an opportunity to poach" customers, says Roth.

Related: Five Simple Ways Startups Can Save Money

3. Scrap employee perks. One way to push the bottom line higher is to cut out the Friday snack that has become a tradition in your office. Don't. It's the little things that make your employees feel valued and appreciated and keep workplace morale up. And that goes a long way toward helping your business.

"That loyalty will resonate from the inside out," says Roth. And happy employees keep your customers happy. "It is all about the customer because if you don't have customers, you don't have a business."

Related: Three Tips for Saving Money on Mobile Plans

What's the biggest mistake you made when trying to save your business money? Leave a comment below and let us know. 

Catherine Clifford is a senior writer at Entrepreneur.com.

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