Even if you have a groundbreaking, game changing, innovative product or service that practically sells itself, you can easily run your company dry of funds or seriously hurt your ability to secure further funding. Growth is the name of the game and you need to spend money to make money, but it pays to be thorough and thoughtful with these spending decisions.
I like to think that at my company, Apptopia, we do a damn good job of spending smart and it's a core piece to running our businesses successfully. We compete against a company that has 8x the number of employees we do and more than 30 times the funding we do so we can't spend money like they can to achieve our goals.
You've probably heard plenty of startup horror stories where the company runs out of cash and has to fold. Lavish parties, first class lifestyle and Michelin star dining are not smart spending choices. The two main areas where I see business owners make spending mistakes the most are on hiring and marketing, so I'd like to share some wisdom I've picked up over the years.
More resources doesn't mean more revenue
In terms of hiring, It's important to plan ahead and anticipate needs that are coming. Many entrepreneurs make the mistake of hiring more sales personnel in order to create growth, or they will hire specific positions to fulfill some cookie-cutter mold they envision companies need to fit.
Does your startup actually need a dedicated human resources or IT employee? If you cannot clearly see the demand coming, don't make the hire.
Something else to consider before hiring more personnel is to speak with current employees and identify bottlenecks. Hiring isn't always necessary, sometimes there are bottlenecks in the sales process.
Talk with your employees and see where you can free them up and save them time. At one point, my sales team could not keep up with our leads and right before we hired more people, we were able to determine several unnecessary steps within our sales process. Removing these steps across the entire sales team let my crew run through more leads which meant less outgoing money for the company and more potential commission for the team.
A top priority of mine as an employer is to make sure my crew has everything they need to be successful. More resources doesn't always mean more dollars. Unlock what you already have.
Keep it in the family
Getting your company's name out there is important but advertising and public relations can get expensive, especially if you hire an agency. Public relations is not rocket science and contrary to popular belief, you don't need an agency to get real results.
If you have time, do some research and help yourself out when you can or simply hire one employee in-house to build relationships with the media and push your narrative. This way your company retains these relationships and not the agency that you will eventually leave.
As a real-time example, if you Google search "apptopia" right now and click on the "News" tab, you will find plenty of top publications covering my company. Instead of paying an agency $15,000 a month, we hired a dedicated employee to get our name in the news in addition to helping other marketing initiatives.
Always make sure to ask yourself if spending on advertising or sponsoring will hit the right audience and actually lead to more sales. Between Twitter, YouTube, Facebook, LinkedIn and Google, you can highly target your ads and often make much more of an impact with simple online advertisements than with something like event sponsorships.
Remember that prices and terms are never set in the business-to-business world. Negotiation is your friend.
Being smart with your money doesn't mean not taking risks. If it pays off, you'll have done wonderful things for your business--and if it doesn't, you'll have learned valuable lessons.
Calculated risks have enabled my company to learn where our money goes the furthest which in turn helps us be even more efficient with our spend. Having a fiscally healthy business will also make your business look more attractive to prospective investors and acquirers.