Costs To Start a Business
How Not to Waste Money
Written by Chris Martin for Gaebler Ventures
Entrepreneurs have an image of being frugal and cost-conscious. However, many small businesses waste money on things that don't help them get more business. Here are some examples.
It's ironic. Private business skewers government entities for their inefficiencies, especially when it comes to money.
Entrepreneurs like to poke fun of big business for squandering funds on parties, business trips to Cabo, and other manifestations of superfluousness. All this would be somewhat logical – if entrepreneurs weren't guilty of wasting money themselves.
It's true. Even though the image of entrepreneurs conjures up lean operations and pinching pennies, there are some things that are huge money-drainers for startups and small businesses. Here are five of them:
Customized logos or fancy letterheads. Really, do you think people look at logos or letterheads and say, "Wow! That's so cool! I think I'll give them my business!" You're right. It doesn't. So take advantage of the word processing software templates and design your own. It requires a little time and creativity, but doesn't cost a nickel.
Super-duper/nifty/cutting-edge brochures, websites, ads, or signs. While they may draw the eye, there's no guarantee they'll draw customers to your door. And when your business is in its infancy, functional and informative marketing materials are probably the most cost-effective.
Gorgeous offices. Unless your customers will be spending a lot of time there, office space only needs to be simple and ergonomic. And for startups, if your desk or kitchen table is all you need to run your business, don't fritter away money on an office.
A corporate vehicle. If it gets you from Point A to Point B without smoking or lurching, your current car is probably just fine. Maybe it needs to be a tad nicer if you tend to shuttle clients around (like a realtor does). But there's absolutely no reason to plunk down tens of thousands of dollars on a luxury car because you think it makes you look like a mogul. Because it doesn't.
A consultant. The value of consultants is questioned even among businesses who can afford them. And you probably can't. Chances are, consultants won't tell you anything that you can't figure out for yourself. But they will eagerly bill you for it.
In addition to material excesses, entrepreneurs often adopt strategies that are counterproductive, which leads to inefficient spending or allocation of funds. Here are five such strategies.
I'll get in on the "ground floor" of this marketing opportunity. If you get this pitch from a marketer, it's code for "I can't show you past results." So avoid it in favor of traditional options. You're not rich enough to be some marketer's guinea pig.
I like this, so my customers will, too. This myopic approach will only result in bringing in that miniscule subset of the market that is exactly like you. Here's an idea: try figuring out what others might like, and act accordingly.
My friends love the idea, so I'll start a business. Even if they do (and aren't just saying so to avoid hurting your feelings), it doesn't mean that they or anyone else will spend their money on it. That's where good test marketing can be really beneficial.
I've built a better mousetrap, so the world will beat a path to my door. Hard truth: the better marketed product or service will be more commercially successful than the higher quality one. Good offerings are important, but making customers aware of them is vital to your company's survival.
My business is so unique, I don't have any competitors. If this sounds arrogant, it's because it is. If you don't know who your competitors are (both directly and indirectly), then you don't have a good understanding of your market. And if you don't know your market, your myopia could be fatal for your company.
When it comes to saving money, half the battle is determining where you are (or could be) wasting it. Focusing your efforts on procuring new business will help you use what funds you do have wisely and effectively.
Chris Martin has been a professional writer for the last seven years. He is interested in franchises and equity acquisition.
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