When you are starting up a business there is a lot of ways you can save money. You know that every penny counts when you are starting up your business. So today were are going to share with you the 7 most common mistakes of wasteful spending in a start up.
1) Assuming the best without planning for the worst. Most start ups fail. The simple truth is that when most people start out a new business they have an idea without a formal business plan. If they do have a business plan they make financial projections that are so rosy they get themselves really excited. This leads to an irrational exuberance and an “I want it now” attitude. The end result is the business owners overspend and are not strategic on where they place their investments.
What you need to do is write up a business plan, and within your business plan have best case, expected case, and worst case scenarios. You must take emotion out of this and look at this completely logically. Then within your business plan, you need to have a contingency plan for anything less than your expected scenario.
2) Failing to shop for different vendors. For every product or service that your business needs that could cost a reasonably large amount of money, you need to shop around. This goes for things like rent, computers, office supplies, marketing services, merchant services, contractors, and paying fair and reasonable compensation to employees without underpaying (and causing resentment), or overpaying and wasting capital.
3) Not accepting credit cards. Accepting credit cards improves sales everywhere. It is now the currency of life. In recent years even McDonald’s, Wendy’s, Sub Way, etc. have started accepting credit cards. They do so because it improves sales by more than 400%. The key when looking for a merchant services provider is to find one that provides free merchant equipment, and low merchant services rate and fees.
4) Relying too much on debt financed employees rather than contractors. When starting out if you don’t need a full time employee for a position, get a contractor. Websites like www.elance.com and www.guru.com are great ways to find good contractors cheap and fast. In addition, if you are using venture capital or bank loans to fund your business you need to be very careful to use every penny wisely.
5) Excessive Debt Financing. If you are looking to finance your business you can do this several different ways: one, a bank loan; two, venture capital; three, your own capital. Obviously the best solution is to use your own capital, and then get setup with a line of credit with a bank in case you need the money. If you negotiate with the bank intelligently you won’t have to personally guarantee the full amount either.
6) Not investing in online marketing. Search Engine Optimization, pay per click marketing, and email marketing have the best Return on Investment of any form of marketing besides word of mouth (with can also be done through Social Media). Fail to do this and your business is missing out on a heap of cash. What is also great about this form of marketing is it is completely trackable so you can know to the penny how many dollars you get back for every dollar you put into your advertising efforts here.
7) Blind Faith – You should have no blind faith in anyone – not even in yourself. For yourself, you should be constantly reading on how to improve yourself and your business. Websites like www.Gazelles.com are great places to get a better than an MBA level education on how to succeed in business – just by reading. When working with your business partners, and contractors as well, bind faith is not great either: trust but verify.
Do all of the things above and your business is on the path to being able to produce prosperity.
