Entrepreneurs get started because they have ideas that excite them more than any 9-to-5 ever could. They know building toward their vision will mean taking on longer hours, higher risks, and more personal responsibility than more traditional paths. But when they’re successful, they will also reap the rewards — in terms of satisfaction, opportunity, and finances.
Yet, to build that emotional and financial fortune, you have to start smart. If you blow through limited resources early on with plans of relying on revenue, you’ll run out of money; your startup dream will come to an end before you make your first dollar.
The practices you establish as you get your business off the ground will become harder to change with time. But if you practice fiscally sound efficiencies from the get-go, you won’t have to shock the culture — or yourself — with changes later on.
When you’re starting your own business, you’re pursuing a dream. And not all dreams come with second chances. Here are five ways to create efficiencies early so you can mitigate risk and maintain forward momentum:
- Use a two-button calculator. As you evaluate your resources and needs, imagine you’re using a calculator that only has two buttons. The first button can only divide by two, and the second button can only multiply by two. Use the division button to divide all revenue expectations in half and the multiplication button to double all of your expected costs.
There will always be more expenses than you think, and money will never go as far as you hope. This calculation will ensure you’ll have enough capital for your cash flow to break even.
- Make every hire count. The adage “be quick to fire and slow to hire” may sound corporate and crass, but it actually suggests decision-making based on thoughtfulness versus impulse. As growth occurs and opportunities arise, you might feel compelled to throw more warm bodies up on the stage. That is usually not a good solution.
Be smart and intentional about each team member you add. And if someone isn’t helping the company grow, you can’t justify the cost of paying his or her salary. In the long run, making personnel decisions in this manner is better for both you and your employees — no one wants to feel unproductive.
When you do hire, balance trusting your gut with the concrete details. If you’ve already decided someone is right for your organization, you may only focus on the positives and dismiss the negatives. Check references (and maybe even references of references) thoroughly. And ask about talents beyond the hard skills required for the role: You’ll need individuals with determination, optimism, creativity, and general scrappiness to succeed in a startup environment.
- Be smart about salaries. Most people don’t jump on board with a startup for the money — they’re attracted to the ideas or the environment of innovation. But they still need to be compensated for their hard work.
If the salary landscape for a particular role seems high, consider other options. Plenty of jobs can be done through consulting, freelance, or temporary employment. Going one of these routes will give you the ability to test your need to better determine if and when hiring for the role full time makes sense.
On the flip side, sometimes one killer hire can replace the need for two mediocre ones. You may have to prioritize hiring a person who can bring something concrete to the table that you can’t find anywhere else. Assess how an individual will add value to your company and whether the higher salary will make or save money elsewhere.
- Add incentives. If you can’t afford options or equity as an incentive to keep salaries at a reasonable level in relation to your growth, a great strategy is to give year-end bonuses tied to measurable key performance indicators. We do this at my company, but if the overall business isn’t within 80 percent of its goal, all bonuses are off. This creates a solid incentive for everyone to drive toward goals and keep efficiencies in mind.
When growth permits, take a hard look at your staff and prioritize promoting from within. When individuals see a clear trajectory forward, they are more likely to be comfortable with starting low, knowing they can grow.
- Develop your own marketing. Promotion, marketing, and communications are expensive. If the expense doesn’t deliver a specific outcome, don’t do it. Too many company leaders have nearly or completely killed their businesses by wasteful promotional spending.
It’s important to have a vision for your brand’s promise, persona, and voice, but you don’t need to invest tons of money with a marketing firm when there are only a few eyeballs on your brand. Follow your gut to establish an initial plan — you can always refresh it later with external support if needed. If you’re going to invest any early dollars in marketing, hire an expert to build your search engine optimization with high-quality content. That will be the gift that keeps on giving.
Don’t let too much risk ruin your reward. Prioritizing fiscal efficiency now will save money immediately, set you up for long-term success, and make you more appealing to investors.
Image credit: CC by Jeff Easter