We've explored some of the common mistakes startups make in the past, and touched upon how spending can result in trouble for many promising companies.
As many as 82% of startups and small businesses fail due to poor cash flow management. While managing your cash and keeping your expenditures low, while still spending enough to get started can be difficult, it is not impossible. With a solid spending plan in place and by carefully avoiding some of the following five common spending mistakes will help give your company a better head start.
1.Technology and equipment
Buying the latest laptops, software, and tools can keep your team happy and working fast. On the flip side, it can prove to be detrimental to your team going forward. Technology is expensive, especially when you're first starting and have a tight budget. It's best to evaluate if your current equipment is efficient at getting the job done until you've built some working capital. Only when comfortable should more expensive upgrades be considered.
2.Advertising and branding
Many companies can fall into the trap of overspending on traditional advertising (newspaper, magazine) that is mostly pricey and not always necessarily beneficial. Highly targeted advertising using Google Adwords and Facebook, promoting through free social media, as well as participating in networking events are usually a more cost-effective and productive way to promote a growing company.
Before advertising, it is important to establish the company brand first. Start-ups often spend too much on things such as their brand logo and website, thinking it will quickly draw customers to them. The best branding is done when you discover your company's core values.
3.Paying too much for supplies
There are many ways companies can avoid the heavy price tags incurred when moving into a new workspace. Spending on ink, paper, files, and other essentials can add up over time. Comparing different vendor prices, researching deals, special promotion offers, and working out a way to earn points or cash back on all your office purchases can help. Additionally, there are many shared work spaces in Toronto that would have all of the office essentials in-house, at a fraction of the price of a regular office space.
4. Hiring too fast
Putting a great team together is essential for any small business. In a business' infancy, hiring too much, too early, can slow your business down. Hiring employees early on should be avoided if possible. Hiring the core essential people you need, and looking for cheaper third party services that can help in the short term can keep the current flow of working capital intact. Some companies prefer to pay staff with equity rather than by salary as a way of keeping employees committed.
5. Overspending on office space
Another big spending mistake made by small businesses is overspending on office space. Real estate is expensive but shared office spaces are not. Along with being able to save on office space, shared spaces are also filled with a multitude of other businesses and entrepreneurs. Collaboration and hiring is often something seen within the spaces and is always beneficial to those involved. Offering a permanent business address and a professional working environment, Workplace One has four locations in Toronto and Kitchener that will allow your business to grow.