Top 10 Wasteful Purchases For A Start Up Business

Top 10 Wasteful Purchases For A Start Up Business

I have had a lot of experience starting and managing new small businesses. My first business venture was directly out of High school and my 2nd year of college in 1999. I knew little then, and possibly sometimes even less today. However, I know about the many hurdles a business owner has to go through in order to ensure that his business is not only successful, but at the very least, profitable. I have gone through many different failed businesses in the past, and each of them have taught me very important lessons in what it takes to properly succeed in the world of business. From retail stores, to MLM, Amazon and Ebay to, successful Tech firm and SEO Marketing company like White Rapids now with 3 offices. It goes without saying that these days I have many different successful businesses under my belt thanks to what I learned from these failed and successful businesses attempts. Thus, it’s for this reason that I have compiled a list of the top 10 wasteful purchases for a start up business.

1- One of the most common forms of wasteful purchase for a start up business is the location of the office. This is especially true or many of the technological start ups that I have started. Lots of people seem to invest too much money on such things as image of the business before it has even lifted off the ground. It’s absolutely wasteful to go out and purchase a very fancy office in one of the successful areas of the city before the business has even got a foot into the world of business. Indeed, this can really waste the money of the investors that are involved in the business and can place a huge burden on the business to start making huge amounts of money just as it started.  I have seen marketing firms with 1-2 clients go and spend $2000 a month for a fancy office and all there profit went directly to the office. While having a nice office is “cool”, there are ways to help you maintain the professional look without breaking the bank. For example, An office is really where you work, you do your Hustle there. If you can find a place with a conference room or nice meeting area that will help you and save you money. Meet your clients at their place of business or have them meet in the conference room. They never have to go to you ”office space”. This is kind of what we are doing. Though we have more than enough clients from our company to have a nice big 5 office suite in downtown Boise, we opted to go to the Collaber Tank for several reasons. The main reason we have a huge common area to meet with clients in a very relaxed atmosphere and also have 3 conference rooms. My little 2 desk office space is great and all we need at the current time with only 1 full time employee at that location. Our other 2 Boise employee are contractors and work from home besides meetings. We have next to zero overhead.

2- In the same fashion, it’s quite evident that individuals who start businesses and go out and purchase a large number of company cars are also wasting their money. There really isn’t a need for company cars when it comes to start up business, unless your are in the delivery business local or national. Lots of people often go out and spend a lot of their money on fancy, expensive company cars for a start up business. Yet again, this is usually to solidify the new business as ‘successful’ in the eyes of the public. However, many people do not take notice to this kind of image marketing and it often leads to the company losing incredible large amounts of money for some cars. I have seen several friends go out and by a BMW or even Porche so they can park it at their new office or go visit clients with it. Though a Porche is always nice, I don’t ever buy a service or product based on what kind of car someone drives. I also don’t judge someone on what they drive, one because I drove a old beater Subaru with rust for 3 years because I wanted to focus placing money into my business and keeping the overhead low. I was then able to sell that retails tore and name for a significant amount of profit, because of the overhead control.

3- What we often don’t see are the small things. Small things such as hiring professional cleaning services for the office on a regular basis. It is of course important to keep the workplace clean and tidy. However, constantly using professional cleaning services, especially for a large office, can really eat up the investors capital that is being used in the start up. There have been lots of failed start ups that have gone ahead and lost all of their money because of small things such as this that eat up all of the money that is being invested by the investors.  Even smaller are little services and lunch meetings that we “take a client out” for and pay. These little items add up and quickly.

4- Wasteful use of cleaning services, wasting too much money on certain advertising campaigns is another way that a lot of the new start ups I have witnessed have wasted their money. Advertising is something that is absolutely necessary to the success of any type of business, whatever niche it may be in. However, spending money on advertising in the wrong ways can be very negative for the business and can be seen as essentially wasting money. This is because lots of people who go ahead and take out as many advertising campaigns from the get go do not understand the complex dynamics of combining a strict budget with skillful advertising campaigns.

5- Companies lose a lot of their money is through yet another wasteful type of spending, such as office catering and entertaining. Catering is a great luxury for a business when they are very successful and wish to spoil their employees. However, for a start up business, this is a luxury that should not even be considered until large profits and success has been experienced.

6- Spending way too much money on security on a new office is yet another way that a lot of start up businesses lose money. Of course, this depends on the business. If there is a lot of cash and valuables kept on premises, then it may be worth getting security. However, if the company is something such as a tech company, which does not necessarily house any valuables, then security is necessary but should not be excessive.

7- Many start up businesses waste their money through legal fees. Although getting the right legal advice and what not is essential to ensuring the future of a start up. Lots of new start ups take this kind of concept to an excessive level, getting too much unnecessary legal advice which can really eat up the finances of the start up in no time. Do you do diligence ahead of time and if you have a strategy you don’t have to worry about legal fees and insurance such until actual product or service launch.

8- Giving yourself, partners and employees a very high starting wage, even though the company has yet to see success. Although it is important to get talented and skillful employees, it’s important not to go overboard in their salaries. An effective tactic is to give all of the employee’s raises in compliance with the success of the start up. We have a friend who had a successful company with 3 partners. They contracted everyone out at the time besides the factory they had purchases. There payroll for 3 people was $24,000 a month. YES $24,000 month for 3 people. Now I know it’s nice to have a good salary but clearly this was part of the demise of why they needed to go out and get loans just to buy more product to sell to customers. Cost of living is significantly different throughout the United States, however 1 can easily live off $4000 in NY if you budget right. $8000 is sitting very well off no matter where you live. Invest back into your business for the down times. If you want to do quarterly and then yearly bonuses great, that is better than trying to pay that awesome salary before you are a stable company.

9-Spending money on unnecessary promotional products such as branded t-shirts that are only worn by employees. The brand recognition that is achieved through something such as this is minimal and is ultimately not very helpful to the future prospects of the business.

10- Finally new start ups like to spend a huge amount of money on such things as having a fancy, top-tier looking receptionist desk. This is something that is only worth it if the business is highly successful and has a strong reputation. Start ups are not worth much in the beginning and don’t really have a reputation, so doing something such as this is not worth it.

Hence, I believe that these are the top 10 reasons as to how many new start ups make wasteful purchases. I highly suggest that anyone involved in a start up go through these reasons and see whether it correlates to their own start up.

Evaluate your priorities of your business. My suggestion of course like any smart up company, keeping the overhead as low as possible is best for ANY company but think about how much more that is for a startup.

Top 10 Wasteful Purchases For A Start Up Business by Marc Normandeau COO/Partner White Rapids Marketing

Boise Office:

2675 w Main St Suite 110, Boise, Idaho 83702 (208-561-0411)

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PO Box 1262, Sandy Utah 84091 (801-438-9335)

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