The Top 5 Ways I Wasted Money In My Startup Business

image of wasted cash going down the drain

 If you are going to start new business, then you are almost certain to make some mistakes along the way. That’s just natural, however, any mistake you make can cost you a substantial amount of money.

 This can be very frustrating as your cash is, in my opinion, the most precious commodity in any new business startup. Research suggests that running out of cash is one of the top 2 reasons a new business fails. 

I suggest to my clients that before they make any major purchases, they ask themselves this question:

“Will spending this money result in any of these outcomes? 

  • Increase production?
  • Cut costs?
  • Make more profit?
  • Get a new customer?
  • Solve a customer’s problem?
  • Neutralize a serious safety risk?

If you answered “NO” to all these dot points, I suggest you keep your money for another day.

My Mistakes

image of person not using a startup system
  1. Business Branding
  2. New Website
  3.  Company Post Office box
  4.  Advertising
  5. Stock photos

What I Did Wrong

man looking frustrated
  1. Business Branding – This is always an exciting part for any new business. The opportunity to design something new and shiny is almost too hard to pass up. New logos, company names, the latest layouts and your choice of colors – what’s not to like? It is exciting and it is fun but it is also expensive and the return is largely unknown. I got a logo, settled on a company name (which I really regretted for years afterward for a number of reasons) got business cards designed and printed and so on. Looking back, I don’t think I got a lot of value for my money. The logo I have seen since on a building, the company name was always too long, it was difficult for people to say – it just didn’t flow and it didn’t speak to my business products either. The business cards took weeks to print, looked attractive, glossy and were of no real use. I handed out like 10 in a year. If you think you really need them, I suggest you buy cards online for $9.99 for 500 that includes overnight delivery.
  2. New Website – Like business branding, a new website with your new business name and logo all over it is hard to say no to. You can build a website better than the multinational companies if you really want to. The sky is the limit here, so are the budgets. In my first 4 years in business, I had my website built 4 separate times. On top of that were countless changes Firstly I used a company that provides a template with a basic design. The trouble with this is that every change, improvement, fix or whatever costs you money every single time. It also takes time for the coders to make the changes you ask for. So I knew early that this wasn’t the model I needed. I then got a site built cleanly. The features I wanted were added in, but really I wasn’t sure what features I was going to need and use. This site lasted about 3 months and I got another coder to build a new site. This lasted another 6 months and out of frustration I rebuilt it myself. So ultimately, the costs of the first 3 websites were simply an opportunity to learn for the future. I sold very few products in this time frame.
  3.  Company Post Office box – This might have felt like a great idea at the time, but ultimately for me it was a silly mistake. I thought redirecting business correspondence to a single place would be smart and efficient. Startups sometimes start out slowly and build from there. It may take a year or even a number of years to design, develop and test new products. Paying for a post office box over the early, formative period when I didn’t need it may not sound like much, but at $48 per month over 4 years that’s around $2.5K I could have spent on something that had more obvious benefits to my business goals.
  4.  Advertising – Advertising, especially online advertising, can be a complicated and costly experience without ever having any prospects at all come from it. The advertisers’ primary job is to get you to buy their products and services, not to get you clients. It’s easy to focus on Google Adwords here, they dominate the online advertising market and for small business it can feel like its almost a day to day pricing rollercoaster something akin to an advertisers stock market. Costs can have wild swings, strangely enough most of the time your costs seem to increase. You get a price per click per keyword but if someone else pays for that keyword, you are now in a bidding war with people you can’t see. It’s easy to get cynical with Google Adwords, they keep a lot of their practices secret and their system is built to benefit them, before customers, but that’s life in business. Some advertisers are really successful with Google Adwords but I suggest that if you decide to go with online advertising, tread warily. They might get you clicks but not necessarily prospective customers. In truth, my experience wasn’t just with one company. Lots of industry websites will take your advertising dollars and justify their prices because the have hundreds of visitors per day. Visitors will see your ads sure, but will they ever be your customers? How could you really know without spending the money and checking the result?
  5. Stock photos – I thought this was a small and reasonable investment for me at the time, it didn’t seem overly expensive and it was too easy to just download images to fill the spaces on my blank websites. Now I look at them and cringe. If I am objective, some images look so obviously fake and for me, my website is a vehicle that is only effective when people trust you and fake photos don’t help build that trust. Its much more effort, but I always try and use real photos for main shots, small photos don’t seem to matter as much but I try to think about the message I want the image to convey and think about how that might look to a potential customer. Otherwise, I just use images as art.

I mentioned earlier in this post that the whole process was about learning and not repeating mistakes over and over. So, in order to close the circle I will briefly explain, with hindsight, what I might have done differently.

What I Would Have Done Differently

image of light bulb signifying a good idea
  1. Business branding – I would have still done branding but I would have waited until my startup was further advanced. Like after I was sure I had the company name, website URL, phone numbers and everything was totally set and unlikely to change. I would also wait until my products were developed, my marketing strategy was documented and I was almost ready to go out to customers. I would also buy a set of 500 business cards for $9.99 plus tax just in case someone asked me for one.
  2.  Website development really works in tandem with business branding. Again, I would try to push this process further down the todo list, more towards the launch phase than the planning phase. If I was set on the URL, I would have an “under construction” site to announce to prospective customers that the site will soon be up and running. This allows people to bookmark your site. I would also add a opt in form that could harvest email addresses. Something like, “if you would like to be informed about our new and exciting products and when we will open, please register your email address on the form provided and we will contact you“.
  3. The advertising is a tough one. I don’t know what I would have done differently, except that I would have researched Adwords and other options much more thoroughly. I would have set it up differently for sure but it can be a complex and difficult area to get value for money, especially for small business.
  4. Stock photos still have a place with me although I have paid for dozens of images that I have never used. I also won’t get back the hours and hours I spent scouring pages of images looking for the perfect shot for my message. I now usually take my own pictures or get someone to take them for me for my main artwork. It may not be perfect but  it is what it is, authentic and real. 

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