What Startups Don’t Need to Spend Money On
March 11, 2008
I’m not proud to admit it, but I’ve made some dumb business purchases during my career and now I’m ready to come clean. Here are a few that come to mind that are particularly relevant to startups and were either committed by myself or other startups that I’ve known over the years.
Office Space
Go Virtual. Why? Because it is easy and it’s cheap.
Staff no longer need to be in the same building to be productive. Furthermore, you don’t need a building for phones, conference rooms, or a place to escape to from your home office. There are plenty of virtual phone services, plenty of executive suites that allow you to rent conference room time, and plenty of coffee shops with Internet connectivity to escape to.
I made the mistake of office space on several occasions only to find no client meetings ever took place, rarely were staff in at the same time to even think about collaboration, and worst of all was the additional line item expense labeled Rent that haunted me every month until the lease was up.
Accounting/Bookkeeping Services
Don’t hire someone to do your books. You need to be in the numbers every day in order to stay on top of the business and the never ending twists and turns that come with running small business or startup. If you can’t handle the books, you shouldn’t be starting a business. They just aren’t that complicated to maintain.
Swag
Don’t you dare buy a t-shirt or a pen with your company logo on them! And if you do, don’t think it is a marketing tactic because I guarantee the pens will end up in a drawer at home and the t-shirt on one of your kids after the cheap thing gets shrunk in the wash. I highly doubt your target audience is a bunch of Kindergarteners so it won’t buy you much exposure.
Back in 2001 I was involved in a startup in which we secured funding to support business development activities that would ultimately bring together a large network of realtors. While my brain kept telling me that a good strategy and business case would be the lynchpin of our success, my youthfulness stumbled across the world of on demand custom printing. Within a few weeks of securing the biz dev funds, we purchased pens, pads for note taking, and a few other things I thought were just cool (err “useless”). In the end, most of the stuff never made it to the meeting, nor did it make a difference. In fact, I still stumble across some of it at home in boxes or desk drawers.
Software/IT Systems
Unless you are a specialized business that requires specialized software/systems, I’d argue you can do most of what you need to do with a word processing program, a spreadsheet, and some accounting software (remember, you’re doing the books!).
I once made the mistake of purchasing some online collaboration software because I felt like we weren’t communicating well enough. Six months later (and 6 monthly payments later) I was the only one that ever logged into the system more than 2 or 3 times.
Software and IT Systems won’t be the lynchpin to your success or failure so just forget about them when getting started.
What should you spend your money on as a startup?
While the situation is different for every company, there are a few common expenditures that are worth making in the startup world. Maybe I’ll cover those in another post as to not drag this one out any longer. Anyway, in the end what you don’t spend (waste) money on is much more important.