The biggest mistake startup founders make in allocating their capital is not monitoring financial results. As a result, they end up engaging in activities that fail to enhance profitability. Here are three profit-eroding expenses startup founders should avoid.
- Sexy Markets
Too many founders target markets that are sexy in order to attract great publicity. But if that segment isn’t buying, the business is just throwing money down the drain.
Tip: Position your company in front of high-value customers, not just sexy customers. Find the most profitable markets, regardless of the flash and hoopla.
- Vanity Events
Founders often fall into the trap of believing that they need to attend every industry event on the planet. Yet traveling usually requires sacrificing time and money.
Tip: Attend only events that have potential to result in revenue generation. A low-key event in your hometown may yield stronger financial returns than a posh soiree overseas. Do your homework and know before you go.
- Excessive Hiring
Another mistake that many founders make is to try and solve problems by hiring a lot of high-priced talent. They wrongly believe that more bodies equates to more sales.
Tip: Only hire people who believe in your product or service and are willing to work on a primarily commission-basis to prove themselves. One highly motivated salesperson can produce the same results as a team of demotivated, salaried workers.
This post originally appeared on Atelier Advisors. Lili Balfour is the founder and CEO of the SoMa-based financial advisory firm, Atelier Advisors, creator of Lean Finance for Startups and Finance Boot Camp for Entrepreneurs. All AlleyWatch readers are automatically eligible for a 50% discount on either of the courses using the preceding links.
Image credit: CC by Chris Potter