If you have ever ordered the steak and lobster special at a dinner that your startup was paying for, go slap yourself. And then do it again, just so you remember that feeling. It will actually be a lot worse if you run out of cash.
Startup founders are optimistic. They have to be, to take what others might consider a risky idea and run with it until it becomes a real, potentially viable business. And hopefully it will become something much more for their customers, employees, and themselves. The ideas that sound completely crazy to most people are the dreams of entrepreneurs.
I completely understand why founders look at the world as all upside, and why they are eager to spend their way to making their vision come true. I understand it because I founded or was an early employee of six tech companies including Aha!
It is great to have optimism for the future — as long as it is tempered with a healthy dose of reality. And that is where some founders and startups get into trouble, especially when it comes to spending.
Even if your business has plenty of money in the bank right now, you want to make it last. That is because the more you have, the more control you will maintain over your destiny. Continually prioritizing your spending according to what will create the most value for your business is a skill that every founder must refine.
With that in mind, here are some money-wasters that your startup simply does not need. Trust me. I have wasted money on each one in past.
You may require a separate office for your business someday, but hold off on renting a separate space for as long as possible. You can still be professional while operating your business out of a spare room in your house. In the meantime, you will save on rent and secondary overhead costs, including utilities, furnishings, insurance, and signage.
Although you might enjoy flying around the country (or world) and ordering expensive dinners with potential customers, in-person meetings are just not necessary anymore. Information is now free and available to anyone looking to make a purchase. Besides, there is this amazing new thing called web meetings with real-time video to help you make that personal connection with people.
Since so much contact info is available on LinkedIn or other sites (including your own), you do not need the extra expense in your budget. Besides, there are better ways to connect. You always have your phone, so when you meet someone new, exchange your details and send them a quick message. It’s a lot harder to lose that email than a card.
Unless you are featured as the keynote speaker, do not waste your time and money on meetings and conferences. Once you tally up the program costs and travel expenses, and factor in the time that you lose from working on your own business, it simply is not worth the expense. You can successfully network on your own for free and pursue professional advancement in your spare time.
Billboards are not only a costly advertising expense, but there is no way your business is ready to prioritize “brand awareness” over targeting your specific, desired customers. Besides, what percentage of your target market will actually see that giant billboard and even know who you are? Be creative and find other ways to connect with the customers who will want what you are selling.
It is great to be optimistic about what the future holds. At the same time, it is wise to be stingy with your spending.
Seemingly small costs can add up to a mountain of spending that limits your options over time. So, develop healthy spending habits and hold yourself to a budget, no matter how much cash you just raised.
Discipline is good for business, and it will serve you well now and in the future. Otherwise, you may wish you still had those dollars in the days to come.
What other items are money-wasters for a startup?