We all know the bleak statistics about startup success rates: 50% of startups don’t last more than 4 years. There are tons of reasons for this, but it’s often because of wasting money.
More specifically, 29% of those failures are usually because these businesses run out of money!
Starting a business will take longer and cost more than what you estimate.
It will take some time before money starts coming in, and even more time for it to come in consistently and predictably! Yet, money will start going out from day one. The thing to ask yourself is whether you’re making a good investment or wasting money.
stop wasting money; make it last longer
First, you’ll need to ensure that you’re not wasting money on unnecessary purchases.
When I first started my business, I didn’t have a job but I did have a bit of savings from past employment.
I cut down on everything I possibly could. I spent less on myself and my social life suffered. Holidays were a distant memory.
Every single personal purchase I made, I scrutinised: did I REALLY need it? What would happen if I didn’t buy it? Could I hold off on it?
And yet, in business I wasn’t as meticulous. I wasted money on things that I didn’t really need. Things that weren’t going to help me build my business.
Now let’s face it, you’re probably wasting money too!
It’s time to find out for sure.
where you might be wasting money
Spending money on something and getting nothing out of it is a HUGE WASTE. It can literally kill your business.
Here are the top 3 places where I see business owners wasting money.
1. public appearance
Having a business name, logo, and website will become increasingly important as your business gets off the ground.
But I hear far too many people tell me that they can’t put themselves out there until they have something to show for it.
And so, they spend a lot of money on custom logos, fancy websites and high quality stationary to help them feel ‘ready’ and like a ‘real’ business.
When you’re first getting going, you have little real knowledge about who you’re in business for and what you really want to say to those people. Your message and your image will continue to evolve over the first 3-6 months (and sometimes longer).
In the beginning, good enough is often good enough. Use the free templates that are out there or find someone online who can knock something out quite inexpensively. Don’t spend more than a few $100 when you’re just starting out.
2. creating a product before you validate it
You love your idea. If you didn’t, you wouldn’t now be putting blood, sweat and tears into making it work. Chances are your friends and family also love your idea.
But it’s one thing to be really supportive of your idea and an altogether different thing to spend money on the product or service that you’re offering. And chances are that your loving friends and family are not going to become future customers.
So before you spend your money on designing, building, or creating anything, you have to get out there and speak to your target market.
Find out what their needs or challenges are. Understand why they (or someone else) would be willing to spend money to have those needs or challenges met. Know them intimately and, only then, start to create the first iteration of what you offer.
Your first iteration shouldn’t have all the bells and whistles. It should be something that you can get out to the market quickly and fairly easily so you can then get your target market to start using it and giving you feedback.
From that feedback you’ll make your second iteration and the cycle repeats.
3. copying best practices of other businesses
There’s a lot of advice out there on how best to do just about anything in business: manage finances, layout your website, use social media, market, manage resources {insert any other function here}. And while it’s great to learn how other people do it, that doesn’t mean that you should do it all too!
When I first started out, I invested $19 / month in an online scheduling tool.
Why?
Because I knew another coach who was using the same thing. I thought “She is successful and she uses it for her clients. If I want to appear organised and successful, I have to use this tool too”.
But the real difference between us?
She was years into business and making a profit. I was months into business and not even breaking even. She could afford $19 / month. I was just wasting money. I didn’t have too many clients to juggle. I could manage just fine without an online booking system.
I could give you a handful of other similar examples from my own business.
Learn from my mistakes.
Just because someone else has chosen to do something a certain way does not make it the right way for you or for your business.
Really question the value that a system, process, tool, or training program will give you before you commit your limited cash into it. And be wary of monthly subscriptions because it can be really easy to forget about expenses that renew automatically.
over to you
I’d love to hear about your experience. What have you found yourself wasting money on in business – whether in the recent or distant past? In hindsight, where did you wish that you hadn’t? Or maybe there is something you wished you’d spent more money on rather than cutting corners.
Leave a comment below and let us know.
So true! When I started my shop, I wanted to have one item of the parcel that customers could keep, so invested in lovely ribbon. The minimum order was so high (I think 100 meters) that I had to spend £700 – and shortly after I changed the logo.
The best find for business stationary is still Moo. I love that place.
Thanks for sharing your experience, Nina. Sometimes there are very expensive lessons that we learn along the way!
Great post! A follow-up question that comes up for me is: How can I know when I should invest in something and when it will be a waste? Because I tend to not to want to invest in anything, but I do know that some investments are good ones. It’s hard to know which is which (except for these 3 instances now, thank you).
Hi Meredith – it’s a really good question. One way that I assess whether to make an investment or not is to be really honest with myself about what I will get from that investment. I ask myself a few questions:
– Will it really get me closer to where I want to be, or is it an unnecessary distraction?
– What are the benefits of making that investment?
– What will I be unable to do if I do not make this investment?
– Does it need to be NOW or can it wait?
Thanks for this! I’m currently in economising mode, so this was very welcome. I have done all three of these things….
I think that when we start out in business, we are often so lacking in confidence that we feel the need to bolster ourselves by reference to other people’s efforts. Research is a good idea, but as you suggest, the most important research is checking that our own offering is really needed and well niched, rather than looking at how others do the ‘glossy’ stuff!
Definitely, Rachel. None of us put our ‘worst’ selves on public display. A lot of time and effort goes into creating the image that we make for our businesses. Very rarely do we see behind the scenes and get a peek at the ‘ugly’ stuff. But the truth is that every single business owner goes through the ugly stuff. Every single business owner questions themselves from time to time. Every single business owner looks at those around them and thinks, even if only for a moment, ‘why do they have is so easy??’.
Listen to your customers. Respond to their needs. And stay away from making comparisons 🙂