By Mandy Froelich, Black Hills Financial Planning
Equipped with a novel idea, passion to see the vision through, and a little cash, you’re probably ready to dive into being an entrepreneur. While I commend you on your spirit and the passion you bring to the table, don’t forget that every worthwhile idea needs some time to breathe, ruminate, and ferment into its most delicious variation before it is ripe to act on. Failing to see the process through is a primary reason so many entrepreneurs – including myself – often waste money in the beginning stages of developing a business.
Over-eager and ready to change lives, we barrel toward the end-goal, oftentimes not realizing that the concept still requires much more infrastructure before it is ready to materialize. When we rush the process, we cheat ourselves and others out of the richness of the idea. For this reason, it’s important to recognize the 5 ways one can quickly waste money as an entrepreneur by “placing the horse in front of the cart,” so to speak. Successful entrepreneurs know how to work at a quick pace, but not rush the process.
Website Before the Product
While a website is vital – especially in the post-COVID-era when more and more people are shopping online – no designer will build you a decent website until you have a fully fleshed-out brand, which can take months to solidify. Springing thousands of dollars (yes, a good website is typical $5k+) for a website you might need to change a few months out can harm your bank account and stall growth in the early stages.
Appearance vs Product
If you’re more interested in hiring models to rep the first prototype of your product or fill your Instagram with glamorous shots, your head isn’t in the game. Especially in the early stages, you need to be refining and perfecting the product to the best of your ability. Most importantly, you need to keep the concept simple – particularly if striving to receive investment to expand the initial business. Putting money into improving a product or the way you market your services is worthwhile; putting on a show for the sake of boosting your own ego is not.
Business Cards
If there is one thing I’ve wasted hundreds of dollars on in my life, it is purchasing business cards before I fully established my brand or my role in the companies I was creating. I rushed the process, using vague terms and designs not on-brand for the temporary feeling of security. “Now, I have some way to refer an interested client to my site if I run into them!”. Finalize your brand and role first, then move forward with business cards. Pro tip: When hiring new staff, such as a General Manager, don’t spring for 1,000 cards right out of the gate. You can always purchase more, if needed, usually at a comparable price.
Poor Market Research
Perfected branding? Check. Efficient internal processes? Check. Organized accounting system? Check. Wonderful – you’re pretty much ready to go, right? Wrong. Even if the infrastructure of the business is on point, your product needs to match or exceed expectations. Many entrepreneurs go wrong in thinking that their opinion matters, and that they don’t need to ask the public (varied demographics, thank you) for feedback. Failing to do so causes the company to lose revenue later and diminishes the company’s reputation. Do you truly understand your client/customer? Get out of your head and into the head of the buyers that come to your business. What do you offer that they need, and how can you fill that need better than anyone else?
Striving to Grow Too Fast
For many entrepreneurs, leasing their own building or office space is a sign of having “made it.” But growing too big, too fast, before the company has scaled to cover the overhead costs, can be a detrimental mistake. As is the case with all of these, striving to go too fast can really eat away at savings reserved for payroll and operating expenditures. Don’t make the task of starting and growing a business even harder by taking out a mortgage or leasing a large space before you can fill it with a team and product sustainably.
These are some of the easiest ways to lose money as an entrepreneur. What are your thoughts? Comment below and share this article.
