They say it takes money to make money, and this is true in some ways. However, in the early stages of a startup, you have to be frugal. It’s important to take the time to really consider what’s worth spending money on while you’re still trying to grow your business and become profitable. You need to budget and spend on the necessities, but here are some areas that may not be worth spending your money:
1. Office space:
There comes a time in the life cycle of every small business when the current work space, be it a home office or small office, is no longer an option. However, you need to be financially strategic when considering where to move. Research the price/square foot for a new, larger office in your top 3 locations along with the price of a shared office space. Be sure to also consider the lease terms – 3-5 year leases are not out of the question in big cities. Also, try looking in areas slightly outside of your ideal location or in older buildings, sometimes it gives your office more character.
2. Over staffing:
The key to successful hiring in a startup is hiring employees who are eager, intelligent, and who can wear many hats. Do not hire for specialized roles if possible. Instead, hire a team who can work on multiple teams and projects. As you grow more, hire people to focus on specific areas, but in the meantime, save your money.
3. Agencies:
Again, hiring is key to running a fiscally responsible startup. Hire marketing employees who can cover what needs to be done immediately for marketing, advertising, and PR. One broad marketing manager is more cost effective than both an agency and multiple specialists. When you focus in on specific areas of marketing, spend on effective, affordable marketing that will show a direct impact (such as SEO, social media, and email marketing).
4. Graphic designer:
A logo is essential for any business, but that doesn’t you should spend thousands on a graphic designer. Try using an online logo maker to create your own logo for a tiny fraction of the price. Down the road, if you would like a more intricate design, you can rebrand.
5. Unnecessary office perks:
In order to bring in the best talent, you need to offer perks. It is now expected that you will offer free coffee and tea, but some businesses go above and beyond with fully stocked kitchens of snacks, sodas, and beer taps. You need to carefully balance the line of keeping your employees happy, and overspending on office perks that aren’t used. For businesses that have millions in funding, it makes sense to put some of that towards perks that will bring in the best talent, but at a startup you need to be selective about this. Try having a few occasions where you buy employees lunch or drinks, instead of constantly keeping a full kitchen.
