The 6 Startup Expenses You Need and the 6 You Don’t

November 2, 2015

8:24 am

Money is not funny. Especially when it comes to your own company. It’s no news that after the bootstrapping stage, startups often fall in the trap of spending their preciously raised funds on things that are not that important – to the point at which they run out of runway and eventually find themselves as another failed startup.

However, don’t rush into choosing the cheapest options possible and cutting down the costs to the barely survivable minimum for the sake of impressing your investors. In fact, some expenses are not only unavoidable, but necessarily.

6 Important Startup Expenses

  1. Market research. Never cash out until you precisely know what your customers are ready to buy. Knowing the ins and outs of your target market and having a clear vision of your ideal buyer persona is a must for any startup. Understanding what the market needs, how tough is the competition and what pricing strategy will work best is an essential component of success.
  2. CFO or accountant. As we are talking about optimizing expenses here, you need a person to keep a close eye on your business finance. A good CFO will save you more money than you pay them by holding you accountable for spending and analyzing your current ROI and ways to increase them.
  3. Legal counseling.  Paying for professional legal advice can save you heaps of money in the perspective in terms of potential legal settlements later on. Have doubts about certain legal procedure? Do splurge on a lawyer.
  4. Marketing and branding. The biggest nightmare of most startups is when no one comes on the big launch day. That can be a real life scenario if you invest poorly in your marketing. Certainly, you should not waste more money than you can afford (ask your CFO about that), but consider hiring a reputable company or stashing creating an in-house team with the best professionals.
  5. Customer Support. How do you plan to retain and assist the customers you’ve spent time and money acquiring if you have zero people to cater them in a timely manner? Doesn’t sound really clever, right?
  6. Technical Support. Never play it cheap when it comes to choosing your hosting provider and creating a stable website. There’s nothing worth than losing customers because your payment form glitches or your website is down during a particularly high traffic peak.

6 Startup Expenses You Should Avoid

  1. Expensive software solutions.  Most tools and software these days have cheaper, free or heavily discounted alternatives. Don’t rush into buying yet another trendy product until you are 100 percent sure it is essential for your company’s further growth.
  2. Fancy office space. Sure, you’d love to move to a bigger, brighter space and stock it up with loads of cool furniture, art prints, and elements of Scandi design. However, the moving and furnishing costs can quickly add-up. Don’t rush into building an office of your dream until your company has a proven traction record.
  3. Non-measurable outreach efforts. Whether it is influencer marketing or personal branding, once you see that the strategy is not bringing any consistent measurable results, stop spending money on it. Instead, invest in those marketing channels that already gained you some feasible outcome.
  4. Hiring staff before you are ready. Sure you’d love to have more people on board to share the joys of building a company together, but if your business isn’t ready, you’ll just waste the money. Outsource and hire out-staff freelancers to work on permanent basis till your business advances steadily.
  5. Expensive equipment. Yes you’d love to have an ultra-tech office, but now may not be the best idea to heavily invest into new gadgets. Purchase things you actually need, rather than those you want.
  6. Spending money before you’re even sure you’ll make some money.  Don’t rush into spending large sums before you are making enough to cover it. Live according to your means is a golden rule both for personal and business finances.

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Dianna is a former ESL teacher and World Teach volunteer, currently living in France. She's slightly addicted to apps and viral media trends and helps different companies with product localization and content strategies. You can tweet her at @dilabrien

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