Startups are often tight on cash, but even if yours has some extra dough, it’s crucial to be smart about spending. Well-meaning as they may be, these are the major blunders I’ve noticed young startups making with their hard-earned bucks.
But no need to stress! I’ll clue you in on better ways to achieve your goals without burning through your cash.
Hiring a high-end branding agency
You aim for your startup to have a stellar appearance, distinguish itself from competitors, and give off the vibe of an established player, despite being fresh on the scene. It’s a valid aspiration, but three challenges come into play:
- You and your customers are still figuring out the identity of your company.
- The target audience and how you serve them are subject to significant changes in the initial years.
- Your top focus as a startup should be discovering the perfect product-market fit.
Throwing down 10, 20, or 30 grand on some agency to craft your brand identity and messaging? Big waste. Even if they knock it out of the park, you’ll end up revamping it within two years. Better move? Chat up your customers, let them spill the beans on the value you bring, and slap that on your messaging. Grab a young designer or check out platforms like UpWork for your logo and brand guidelines – you can get all that sorted for less than a grand. Easy on the wallet, big on impact.
See Related Article: 5 Principles For Startup Success
Backing events and trade shows
You’re eager to create a buzz in your market, and you’re eyeing the places where your target customers gather. Events, conferences, and trade shows might seem like the right move, but hold off on sponsoring them – at least for now. First, you’ve got to demonstrate three crucial points:
- Confirming you’ve hit the sweet spot with product-market fit for this audience.
- Showing that you can consistently turn new leads into paying customers.
- Proving your ability to acquire these new customers cost-effectively.
Attending a trade show as an exhibitor can cost thousands, and sponsoring a major industry event may set you back over $100,000. At this point, it’s smarter to attend without sponsoring. As an attendee, you can still connect with the same people at a fraction of the cost. This approach allows for experimentation, especially when you’re trying out an event for the first time and unsure of its value.
Start by attending. If you can attract customers and see a solid return, consider sponsoring it next year.
Expanding your team too quickly for growth
Startups often rush to scale, thinking they’ve hit the jackpot with a paying audience. But before you expand, address key factors:
- Retention: Ensure customers stick around and keep paying.
- Onboarding: Can new hires match your performance?
- Channel-market fit: Can you consistently acquire customers through various channels?
- Unit economics: Will each sale bring in profit?
Rather than hiring right away, establish a process to prove systematic and profitable customer acquisition. Begin with one key employee managing this process for a department. Ensure consistent success before gradual expansion – don’t rush it.
Promoting without an effective website
Advertising without a high-converting website often leads to losses for startups. Common issues include:
- unclear messaging
- unanswered questions
- a lack of product visibility
- confusion about the next steps to purchase
Fixing these issues is crucial to avoid a leaky sales funnel. Focus on optimizing your website for easy buying before investing in ads to boost traffic—anything spent beforehand may be futile.
Setting prices too cheap
Avoid missing out on revenue by setting your prices right—a common issue for most startups. Instead of lowballing, consider:
- Ask potential customers about their price expectations.
- Check competitors’ pricing and align yours accordingly.
- Research the value your tool brings and price it at 1/10 of that.
As you gather insights, refine your pricing. Prioritize customer feedback and market learning over spending. This approach ensures better decision-making, helping startups earn more while spending less.
