How To Spend Money As A Startup Business
Let’s face the reality of things! Overspending kills your startup business like a woodpecker to a tree. Knowing what to spend on while running your startup business can be a determining factor for your success. There are countless guides on the internet on how to spend money as a startup business. Many of these guides touch various areas depending on the writer’s perspective and experience. Succinctly, I will point you in the right direction on how to spend your money as a startup business so that you can position yourself for success.
Don’t Spend Money On Non-essential Things
Yeah, I know it can be a bit confusing to know what’s essential and what’s not. Especially when you are just getting to the business world for the first time. It’s very easy to mistake somethings as essential when they are actually not.
There’s a simple formula for realizing what’s essential and what’s not: ESSENTIAL EXPENSES GENERATE MORE MONEY AND FOSTER TEAM ADHESIVENESS.
It’s fine to say that the formula is a bit vague but let me break it down for you a bit.
Expenses Generating More Money
The only ways you can generate revenue for your business are through investors and customers. If your taste for office space or business aesthetics is very high, you may be pushed to spend on expensive office spaces, furniture, marketing tools and all that. However, these things may be total turnoffs to investors and customers.
Remember the popular story of Steve Jobs and his partner at Next, Inc., Jobs startup during his hiatus at Apple? They had an investor visiting their office and they had to hide their Porches just to make sure that the investor got a modest view of the startup business.
How you spend your money as a startup business goes a long way in getting your investors and customers to trust you.
True and loyal customers don’t fall for aesthetics. Rather, they admire your ability to keep it simple.
Being simple doesn’t mean you have to be a Cheapstake though. It only means that you can make inexpensive things look classy.
If you need office space, you can try getting a simple and affordable one. If you need furniture, you should get something simple and serves its purpose other than decoration. Decorating the office is fine but realize that things can be ornamental and still be useful for day-to-day activities.
For customers, they really want to grow with your business. Big businesses may boast of large numbers, but the truth remains that only a very small percentage of their customers are actually loyal. These are the ones that have grown with then from the time when they only had a nicely finished mahogany bench on their waiting area.
Expenses That Foster Team Adhesiveness
Most startup entrepreneurs often fall into the trap of believing that employees are intrigued by a magnificent workspace. This is not entirely true, especially for startup businesses.
If your workspace designs and the tools that you spend on make your employees feel out of place, then you’re probably spending wrongly. If your employees are earning so little and seating in magnificent offices, it makes absolutely no sense. Employees are human beings and want to be valued. Trust me, people are delighted to stay in places where they are valued. They will work with their blood dripping if they feel valued above material possessions.
You can’t have employees working through an Apple iMac in your office space but can barely afford a new iPhone with their earnings. If you want your office to look like those at the 43rd of the Manhattan towers, you should pay your employees like those working at the Manhattan towers.
Spend Money On Essential Things.
Since most of the things you think are essential aren’t, what then is essential?
Basically, you have to spend on endeavours that:
- Protect your business from the prying eyes of legal vultures.
- Keep you on track at all times
- Improve real-time customer experience and acquisition
- Builds your personal and business network.
Alright, relax a bit let me break these four things down for you.
Steering Clear Off Legal Vultures
Business startups tend to fall into legal ditches when they try to scale or as they get bigger. We have heard of businesses paying huge fines for issues like tax, corporation filings, and several legal stuff that had slipped through their fingers when they were starting up.
It’s very easy for these documentations to slip through your finger as a startup entrepreneur. Trust me on that. If there is any advice you can get on how to spend your money as a startup business, it would be about putting your business in place legally.
How you can do this is not rocket science.
- Work with an accountant or CFO to keep financial records.
- Hire tax professionals and legal advisers.
- Get an experienced professional to guide you through business registration and filings.
Keeping Track Of Your Business
Your business is a journey. Like every journey, there’s a destination in mind and there are a few paths to get there. If there’s a place to spend your money, spend it on finding the right paths to your destination.
Let me use plain terms (please, excuse to my upbringing, my tendency to speak vaguely). A good startup business is always focused on serving a set of customers and penetrating their markets. If you really wish to accomplish this fit, you have to spend your money on things that put you on the right track and help you ensure that you remain on that track.
I’d recommend that you spend on these:
- A good (realistic) business plan
- Intensive market research
- Brand building strategies
- Courses, books, seminars/webinars.
Improving Customer Experience
Customers are your lifeblood. Love it or hate it, you will have to tie their shoes and wipe their butt. You can hate me for saying that, but don’t forget to thank me for keeping it real.
How you spend money as a business startup reflects greatly on the way your customers see your business. They may not be able to stick a pin on the fact that you misspend, but their experiences will seldom say so. And believe me, their feedback travels faster than pollen grains.
If you want to improve customer experience, you should consider spending wisely on these:
- A freaking good PR agent.
- Badass customer service obsessed about customer satisfaction.
- Good marketing and sales team for customer acquisition.
Building Your Personal and Business Network
You can build a business on your own. That’s a fact that you can argue and most entrepreneurs won’t waste their time listening to your argument. They’ll rather invest that valuable time elsewhere. But the truth remains:
Networking with the right people is your “Get Out Of Jail Free” card throughout your business journey.
Although I consider it a good practice to offer helping hands and mentorship to those beneath you, we often offer those hands to people that are unserious about getting ahead. So, focus on getting ahead. When someone lower wants to get ahead, through you, they will show serious commitment to doing that.
That said! One way to spend your money as a startup entrepreneur is to build a strong network of friends, partners, associates, acquaintances, and whatever you can. Some ways to do this include:
- Buying lunch for people that are more important than you. You can guess how far this can go.
- Memberships that you really need e.g., WeWork Membership and the others alike.
Spending can happen very fast but need you to know this:
Spendings that happen so fast that you can barely track it are usually not essential and you may have made those decisions emotionally.
Come up with a spending principle to make sure your spending is guided. Take the time to differentiate what’s essential from what’s not.