Question: What is one major spending mistake entrepreneurs make unintentionally?
Paying Too Much in Merchant Account Fees
"One critical component in your business is how you collect money from your customers. A large piece of that for, many companies, is credit card processing. As someone in the industry, I know how costly it can be to make a knee-jerk decision to set up what is quick and has a simple pricing model, rather than finding a reputable rep to save you on fees."
Hiring the Wrong Coach
"Business coaching is a huge business and it's easy to get swept up into making a five-figure investment without considering what your business needs most. Be willing to take your time, really research a coach's reputation and get the right fit."
Paying for Services That Charge Monthly
"Services that charge monthly can become a financial drain. The prices don’t seem high but when you multiply everything by 12 months, but these benign costs can really add up. A lot of early stage entrepreneurs are not tight enough on costs. Imagine if you had found enough savings to hire another employee. I’d much rather have another great employee than a bunch of rarely used services."
Spending Too Much on Rent
"Getting a cool office at the beginning might seem like a great idea. You can afford it this month, but can you really afford it for the next year or two? I have seen people who have glamorized the "startup lifestyle" and believe cool offices are a necessary part of it. That couldn't be further from the truth. You can change the world straight from your garage."
Paying Unexpected Legal Expenses
"What may seem like a simple legal question can result in a twenty page memo and a $3,000 invoice. Some attorneys are willing to offer project rates or a cost cap on a project to help you budget your legal expenses. It is worth asking your attorney if they would consider a project rate or cost cap fee arrangement. After all, if you don't ask, you don't get."
Hiring a PR Firm Right Away
"All too often early-stage entrepreneurs are enticed by the glamour and recognition of articles, awards and credentials, and hire a pricey PR firm in excitement. However, it is critical to resist that urge and let your work be your calling card. If the energy and passion you put into your work shows then the awards and recognition will follow organically."
Not Keeping Track of Small Subscription Fees
"A SaaS CRM is 40 dollars a month, hosting is 50 dollars a month, social media management might be 20. Keep track of these in a spreadsheet so you know when your recurring outlay is getting too high and what you can consolidate. If you don't, you'll quickly find yourself spending several hundred a month for a package of services, half of which you might not even really be using any longer."
"Know your budget numbers day in and day out and don’t spend on things you absolutely don’t need. Did you check the shipping rates with multiple carriers? Are you making more than you’re spending? Numbers don’t lie. Get it together from the beginning and don’t sway from it. Hold your ground and make tough decisions if you have to."
Having Liberal Hiring Policies
"When you're first starting out, avoid unnecessarily inflating your employee head count. While it may be nice to have an office manager, an administrative assistant and a dedicated HR person, most of those tasks can either be outsourced or handled as shared responsibilities. Limit your overhead and operate lean because profitable businesses are ones with true staying power."
Signing Endorsement Contracts
"If a celebrity or expert takes an interest in your business, its tempting to sign them to endorse your product. An endorsement alone is not going to sell your business -- you still have to build awareness and market the product. Endorsement deals are often seen as a silver bullet when, in reality, they cost a lot and offer little return if you don't support it with marketing and operations."
Overspending on Cellphones
"Cellphones are expensive, but your employees need them to interact with customers. Make sure you get a corporate wireless plan. If you don’t qualify for one, then go with a less expensive prepaid plan."