I'm a firm believer that even a tough economy provides rich opportunities for start-ups to innovate and thrive. In fact, more than a few ventures that were launched during recent downturns are now household names. But in today's uncertain business climate, when credit is tight and stretching your start-up dollars is the smart way to go, it's critical that you avoid cash-draining mistakes. This is especially true during the all-important early months of your venture when you're under a lot of financial stress and any mistakes you make can be extremely costly or even fatal.
To help you stay lean and laser-focused during your launch, I caught up with Karin Abarbanel, an expert on start-up strategies and co-author of Birthing the Elephant: the woman's go for it! guide to overcoming the big challenges of launching a business. Part portable success coach, part action guide, this book maps the launch cycle, taking entrepreneurs step by step through the first 22 months of a start-up -showing them smart moves to make and pitfalls to avoid. I had the pleasure of interviewing Karin last week on my weekly show on the Her Insight Network, The Million Dollar Mindset, and I couldn't resist introducing you to her expertise here as well. Karin and I discussed how to avoid cash-draining pitfalls by:
Q: Just how important is it to bypass the most common cash pitfalls that the entrepreneurs you interviewed said warned against?
A: It's critical! Launching is a risky business. To beat the odds, you need more than a promising product or service– you also need a smart start-up strategy. Maximizing your launch dollars is key during the first 24 months–that make-or-break time when every decision counts and mistakes can really endanger your success. But here's the good news: even if seed funding is a hot button for you, by tapping your ingenuity and leveraging your cash, you can turn a tight budget from a liability into an asset and provide a strong springboard for growth.
Q: For Birthing the Elephant, you interviewed hugely successful entrepreneurs like Bobbi Brown, and Liz Lang, as well as launchers in a whole range of fields. What's some of the best frontline advice they gave about avoiding costly pitfalls?
A: Based on the feedback we received, when you're in launch mode, there are a number of cost-effective action steps you can take that will really help you build a sound financial base:
Come up with a financial framework – and stay within it: Map out a budget you feel comfortable with and then make a decision to work with it. Cultivate an entrepreneurial mindset -- see this as an invitation to ignite your ingenuity rather than as a constraint. Don't let outside suppliers persuade you to take on too much debt or more risk than you feel you can handle.
Substitute brains for bucks: Make 'creativity not cash' your start-up mantra. Barter early and often: it's one of the smartest start-up moves you can make. One entrepreneur we interviewed traded fitness workouts for legal advice; another traded gift baskets for professional photos for her website; yet another volunteered her start-up as a case study at a local college and received thousands of dollars of market research for free. The possibilities are endless and the savings can be huge.
Don't overspend on image: Confusing image with professionalism is one of the biggest start-up mistakes you can make. Don't get carried away with buying state-of-the-art equipment or furnishing your home office expensively. Forget the super-slick packaging or a Web site with all the latest bells and whistles.
Instead, keep your eye on delivering high quality and real value. Clients want service and results – they don't really care about how you provide it.
Go the 'guerilla marketing' route: One of the biggest traps launchers fall into is buying costly advertising or hiring a professional pr firm to make a splash in the media. Costly outlays on this front are rarely a sound start-up investment. No one is better equipped than you are to tell your story and promote your product. But make sure your pitch is newsworthy. Talk to other entrepreneurs about how they get the word out creatively and cost-effectively. As one expert observed, 'you're not in the business you're in, you're in marketing.' Mastering this skill is vital to your success.
Don't outsource prematurely: Hiring other people to do work that you can do yourself too early can create a serious cash drain. Whether it's Twittering, writing a press release or building a simple, but functional website, you'll be amazed at what you can do when you decide to 'figure it out or find it out.'
But make sure you don't spend 80 percent of your time on trivial pursuits when you should be finding clients and marketing.
Vet vendors carefully: Just because you're a start-up doesn't mean you should turn to another start-up for expertise in areas where you definitely require outside support. Do your homework before you engage anyone. Make sure the people you work with have the right experience and can deliver what they say they can on budget and on time.
Watch your pricing: Under pricing is a trap that many start-ups fall into. But if you don't price your products or services profitably, you can easily find yourself playing financial catch-up – not a winning strategy. Knowing how to price fairly and profitably is a survival skill that you need to acquire.
Stay true to your original vision: When new ideas crop up they can be very seductive. But it's especially important when you're already stretched six ways to Sunday to keep your eye on the prize. Stay focused on your original business concept and the core value you want to offer. You can always branch out later, but if you get sidetracked early in your launch you may end up wasting money and momentum.