The Top 5 Ways StartUps Waste Money

by | Aug 20, 2012 | Business | 22 comments

Guest Post from Mindy Crary: Financial Coach at Creative Money
 

Starting a business is a challenge, and probably one of the most intimidating things that a potential entrepreneur can face.  But budding entrepreneurs often make the mistake of thinking that a business is more expensive to start than it actually is!  The key is to be conscious about what you are spending money on, and to avoid the pitfalls of focusing on everything except your revenue.

After reading Loralee’s blog post on running her business on $30 per month, I was inspired to build on her idea.  What are the obstacles—mostly self-created– that prevent a startup from succeeding?

To Succeed, Avoid These Things

Here are the top 5 mistakes I see entrepreneurs make when they are starting their new business:

Emphasizing Anything Over Connection.  The number one thing that all startups have to do is AQUIRE CLIENTS.  If you’re prioritizing taking a class, building your website or putting together your newsletter BEFORE you prioritize prospecting, you’re not thinking like an entrepreneur.  Talking to existing connections and meeting new people should always be the #1 priority to building your business.

Not Working Close To The Revenue Line.  Working close to the revenue line means consciously choosing to engage in those activities that affect profitability BEFORE taking care of business.  When you look over your To-Do list for the day or week, you need to ask yourself, which of these tasks lead to revenue the fastest?  And then complete those tasks first, always!

Bright Shiny Object Syndrome.  When you’re in business for yourself, it can be isolating and sometimes lonely.  That makes us especially susceptible to believing that the next course, class or coach is going to be the end-all solution to speedy profits and a six-figure income.  We can waste thousands of dollars when we abandon our solo plan and opt to follow the newest distraction, because often we’re not equipped to implement immediately anyway.

Not Trusting Self.  No matter how little you think you understand building a business, you can never delegate or defer strategic decisions to someone else.   If you don’t trust yourself, the next step is never to allow someone else to make the decision for you, the next step is to educate yourself so you never second-guess yourself in that area again.  I wish someone would have told me this about 15 years ago; I cringe at the amount of money I have wasted wishing someone would just hand me a solution!

Perfectionism.  Everything is a work in progress, yet new entrepreneurs often hesitate to put themselves out there.  The perfect name, website, program . . . you’ll wait forever and never get to actually helping anyone if you wait for perfect!  You must retrain your brain to believe that perfect is the enemy of moving forward, and “good” is good enough.

How To Decide Where To Invest Your Money

Once you have identified where your business thinking might be wasting money, you can start to assess your planned spending more rationally by asking yourself these three questions:

Am I making a business spending decision based on emotion or need?  You’ll know because emotional spending shows up in other places in your body, whereas just buying stuff you need evokes zero physical reaction.  For example, I’ve never gotten nervous buying yellow pads or re-upping my hosting fee for the year.  If you’re having an emotional reaction, STOP and figure out the deeper need you might be trying to fill.

Do I need to buy this to get more clients?  When you operate on a shoestring budget, every extra cent you make should be funneled back into revenue production.  So if the expense doesn’t help you build your list faster, meet and convert more prospects, you can probably avoid the purchase for a while.  And you need to be specific as to the “how” it’s going to help you and how you’re going to track and assess your return on investment.

Am I purchasing more than I can implement?  I find most people over estimate the amount of tactics they are able to implement.  So buying a product that promises 10 Ways To Build Your List is overkill . . . you can focus on ONE tactic for a year and see major changes.  Concentrate on going deep on each individual tactic for a longer timeframe, instead of “dabbling” in multiple tactics; you’ll save money AND become much more effective in your chosen strategy.

ACTION THIS WEEK:

  • Make a list of the things that you need to do consistently to work closer to your revenue line
  • Review your current expenses; is there anything there that doesn’t serve you anymore?
  • Vet any planned purchases through the 3-Question Review process.

If you want to learn more about conscious spending and how to find the best use for every dollar that comes into your business, consider reading my ebook, Getting Started with Conscious Spending.

In the comments below, tell me…

  • What are some of the ways you’ve wasted money in the past?
  • What action do you plan to take this week to become more conscious about your spending?

 

 

Mindy Crary (MBA, CFP® practitioner and financial coach at Creative Money) helps you become a lot more educated (never inundated) about not just your money — but the whackjob behind it. Check out Creative Money and sign up for more valuable money tips.

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22 Comments

  1. Tal Gur

    Great read. really useful. I especially liked “Bright Shiny Object Syndrome. When you’re in business for yourself, it can be isolating and sometimes lonely. That makes us especially susceptible to believing that the next course, class or coach is going to be the end-all solution to speedy profits and a six-figure income”!

  2. Linda

    I just happened onto your blog and as it happens my daughter and I have just reopened our hair salon with a new focus. The temptation to have to have every possible product available is tempting but financially impossible right now. I think that your guidelines will be very helpful, and I liked another comment about KiSS “Keep it Simple Stupid”.

  3. Kat Bouchard

    Great post Mindy! When I started my first Bricks and Mortar business it was soooo hard not to waste to much money on pretty things to decorate the space. In the end though we learned to focus on the areas that were going to get us the biggest return the fastest. Later once things were running smooth we were able to spend some extra money on the ‘shiny objects’ that we just couldn’t live without!

  4. Tina Pruitt

    Love, love, love this post and hope all new entrepreneurs read it….and old! I truly wish I would have had this info 2 years ago before I made some of these mistakes over and over again. I will definitely be bookmarking this and returning to it often. Great post!
    xo, Tina

  5. Meg

    Great post. Its so hard to not get sucked into buying the next shiny object (be it e-course, WordPress theme or amazing app …)

    Love your 3 Question Review process!

    • Mindy Crary

      Thank you Meg, I’ll be curious to know how it works for you!

  6. Jia Ni

    Great post with lots of useful information. Thank you Cathy!

    • Mindy Crary

      I think you meant Loralee or Mindy, but thanks all the same!

  7. Cathy

    Mindy, I loved this blog…and I really like the picture of the woman laying in bed with her laptop and credit card! Do you know how many wordpress themes I bought that way.

    Make a list of the things that you need to do consistently to work closer to your revenue line
    Review your current expenses; is there anything there that doesn’t serve you anymore?
    Vet any planned purchases through the 3-Question Review process.”
    Great list!
    Thanks. ~Cathy

    • Mindy Crary

      Thanks Cathy! I need to get a laptop, I am missing out on a whole subculture :o)

  8. Christie Halmick

    Great post Mindy & Loralee… perfectionism has slowed me down too many times to mention! But I’m working on that.

    • Mindy Crary

      Thank you Christie! I am also a recovering perfectionist :o)

  9. Ashley Taylor

    Ahhh such a great topic to be discussing and such a huge one at that 🙂

    Trusting Yourself is something that I have really really begun to tap into more and more — I’ve been really focusing on trusting my gut and my intuition now with my business. I might do it outside of biz but implementing that into how I am as an entrepreneur has been insanely helpful.

    • Mindy Crary

      Yes Ashley! I can tell when I read YOUR blog how successful you’ve been about using your intuition and gut in business! Keep up the good work!

  10. Megan Flatt

    OMG…I do every single one of these!!! Each one I read, I thought “oh yeah, I do that!” I literally just printed this post out and highlighted the 3 questions. I need to start following this religiously!!!

    • Mindy Crary

      Woo-hoo! Glad I could be a resource for you ;o)

  11. Julia Neiman

    These are great points Mindy. Thank you for the reminders. I believe in the KISS principal – Keep It Simple Silly. I have an autoresponder, just got audio acrobat for a CD series I’m doing and I use paypal to take payments and donations for my nonprofit. I’m starting an affiliate program so I’m adding e-junkie. That’s business for under $50 a month. It isn’t hard if you get directed to the right resources.

    • Mindy Crary

      Julia, you sound like you’re doing great! Congrats on being so level headed – I love the KISS principal too!

  12. Emma Davies

    Thanks for the reminder to prioritise revenue producing work first. I am always tempted to do the things with more instant feedback and results.

    • Mindy Crary

      Thanks for commenting Emma! I know, I can caught up in the same trap, and i have been self employed for 15 years! The trick is having a tactic to stop and regroup :o)

  13. Leona Mizrahi

    Ah, the ‘old money’ card trick.

    It can definitely get tricky when you are just launching any business. Thanks for sharing these helpful reminders + key identifying places on where and when to spend the shiny coin!

    • Mindy Crary

      My pleasure Leona!

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