According to a recent study, the startup cost of new businesses averages around $30,000. Thus, many financial advisors have recommended that newly established companies should use their startup funds wisely. They do not only indicate saving up but also imply setting one’s financial priorities well.
Since startup financial resources are hard to come by, establishing important purchase decisions in your business is crucial in order to achieve a successful business launch.
Here are 6 money pits every startup businesses can avoid.
1. Subscription-based services
Paying for subscription-based services might appear to give a significant contribution to your business. However, spending your financial resources for them is unnecessary. That is because there are other better options available including project management software programs that are offered at a cheaper rate or as a free alternative. You can start your operations with these economical options and later transition to a paid solution when you can afford it.
2. Non-measurable outreach endeavors
Whether it is branding, marketing, or PR, if the results of your efforts cannot be measured then you shouldn’t spend the fund. At times when your budget is tight, your expenses should focus on those that can certainly build your business. If you want to know about endeavors that can help your business more, click here.
3. Employment of staffs
According to Paul Graham, a renowned tech investor, hiring a lot of staffs in your start-up is one way to misspend funds. It does not only add up to your expenses but also slows down your progress. Since adding staff requires you to carry out recruitment and training, it means you will be spending your time on it instead of heavily focusing on your business.
It is ideal to start with only the necessary number of employees. Most newly established businesses are better off aiming and focusing on marketing or sales and product development before hiring many employees. For your start-up, you should go for contractors, freelancers, and interns.
4. Extravagant business trips or parties
According to some financial fitness advisors, most newly established businesses fail because they have wasted their money for unnecessary lavish social events. It has been considered as a golden role to not spend your start-up funds on expensive business trips and parties. A young company cannot afford this luxury. You can simply attend social events that require lesser costs.
5. Paid email marketing lists and social media followers
Not only are paid email marketing lists and social media followers a scam, but they are also not effective methods of building your customer base. They may help your business look as if it has many followers and attract some people. However, this is considered as a risky strategy since the possibility of actually appealing to the customers is usually low.
6. Expensive shipping costs
Most business intelligence analysts believe that young companies should not be spending their money on expensive shipping expenses. If shipping is really needed for your business, you can cut down your expenses by supporting free packaging programs.
Each business is unique, thus requiring different tools and necessities at different times. If finance and budget are not your strong suit, it is important to have someone who can help you make smart decisions. Once you can understand the right way to spend money on things that are truly essential, your business can be positioned for a long-term success.