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Startup culture has been known for being a bit more extravagant than traditional business environments. The culture of fun, free breakfasts, and happy hours has as much pull for potential employees as the promise of making it big when the startup finds huge financial success.
But, there is a huge responsibility of the founders to make the proper spending decisions for the health of their business. Every business requires different upfront investments, but these are a few of the things that all startups should consider when budgeting out the money from their initial rounds of funding.
Investment in a solid business plan
If you’re at the stage where your business has already received funding, it’s likely that you have established a great idea for a business. But, before you move forward with growth, make sure that your business plan is fully flushed out. A good business plan will detail the specific lines of action and objectives that you are looking to carry out within your business. The research that goes into building your business plan will also provide insight on your market and what needs to be done internally to operate successfully within that realm.
Spending some upfront cash on market research is hugely important to the viability of your business and is closely related to the building of your business plan. You may be deeply attached to a certain aspect of your business, but in-depth market research may prove that the industry isn’t interested in it. Research will help you to understand your industry and help you to fine tune your target audience.
Get An Accountant (& CFO)
Many startups are hesitant to make an early investment into hiring “the finance person”. But, getting someone analyzing your numbers sooner rather than later may very well save your business in the long run. In an environment where it may be tempting to go bigger or faster, your business will benefit from having an individual whose one and only job is to hold you accountable for spending. An experienced accountant and CFO will be able to provide insight on the return on investments and put your business’s financial health into perspective.
A Customer Support Team
No matter what industry you’re in, a customer service team should be hired and built out the moment that you sell your first product. Nothing is perfect, and it is inevitable that your customers will have questions and/or concerns. It is essential to have someone(s) equipped to answer any incoming inquiries from your clients or customers. In the early stages of any business, dissatisfied customers can be the end of your business before you even get your feet off of the ground.
There is a bit of a divide in the industry as to whether or not startups should be spending money on social media advertising campaigns. Some thought leaders feel like social media activity should remain free and organic. But the truth is that social media marketing is the future of marketing. Your competitors are spending money on social media, and you should be as well. In the early stages, your social media spend does not have to be huge. Budget a few hundred dollars a month towards promoting facebook posts and tweets; make sure the spend is highly targeted to get the most out of your money. (That’s where the previously mentioned market research comes in handy.)
This is the era of the startup. Between the simultaneous unemployment crisis America has been experiencing in for the past few years, and the technological boom that is seemingly unstoppable, startups (primarily in the tech sector) have been popping up left and right. With this influx of startups came an entirely new culture: one of relaxed schedules, no dress codes, huge personal freedoms, and a never ending supply of snacks. The stereotypical startup is full of young, charismatic go-getters who thrive in a “fun” and “casual” workplace.
While this new culture and mindset have been hugely beneficial for some companies (see: Google and Facebook), it may not be the right move for all startups. There are a few ways that “startup culture” can actually do more harm than good for certain startup businesses.
Too Much Money is Being Spent
This is actually one of the biggest problems that many startups are facing. Everyone wants to emulate the Google culture, with the free food, the games, and the chic & fun office space. But, the reality is that most startups cannot afford those overhead costs. Many companies will use a lot of the money from their investors to foster this fun space. While this will absolutely make a great impression on both employees and clients alike, it’s important to make sure that your company is saving money and focusing funds on creating a viable product/service.
The Lines Between Boss & Subordinate May Be Blurred
The beautiful part of startup culture is that it’s generally an environment of openness and personal connections. For a lot of companies, “culture fit” is important and people are hired based on how well they will get along with the existing employees. This creates a comfortable place of work and creativity, which is fantastic for productivity.
However, this wholly democratic environment may may lead to issues when hard decisions or conversations need to take place. If the bosses aren’t seen as leaders, and are instead seen as friends & peers, it makes it difficult to reign in a rowdy team, or to provide disciplinary action when an employee is out of line.
Be sure to check out the blog next month to learn more about the potential downfalls of the stereotypical startup culture.
Last month, I started a list of the most common mistakes made by newly formed startups. Starting a business is absolutely a leap of faith, so it’s important that you do as much as you can to set yourself up for success. Let’s go through a few more ways to avoid missteps while trying to build a healthy, strong, viable business.
This is applicable in every aspect of your business model. When your company is finally off of the ground, and it’s time to start taking on clients (or delivering goods), it’s vastly important to make sure that you can deliver on what you promise to your clients. Don’t take on a huge contract just because the money is good; make sure that you have the resources to follow through. The last thing that you want to do is have your first clients be disappointed; the news of bad business practices travels fast. Do everything that you can to ensure that your initial clients are beyond satisfied.
On that same note, be realistic about growth and spending. Younger generations are flying to opportunities that promise “startup culture”. There will not be a shortage of applicants looking for the opportunity to be a part of your new (potentially hugely profitable) company. It’s important to be mindful of your growth in terms of hiring. Also, try to avoiding stretching your budgets to offer “perks” like catered lunches and happy hours just to keep up with what everyone else is doing.
Find the Correct Investors
As startups begin to grow, it is not uncommon for cash reserves to start diminishing. As you start looking for your second round of funding, you’ll undoubtedly encounter several investors whose interest is piqued by what your startup has to offer. Before you make an agreement, and papers are signed, be sure that you and your investor(s) are on the same page. You want to avoid getting into partnerships where a common interest is mistaken for a common vision. Come up with agreements about expectations, and trust your gut. If you don’t think that an investor will align with your goals and expectations, it’s likely that they will not.
It takes a great deal of courage to take the plunge and open your own business. The startup lifestyle is a hugely rewarding one, and can be extremely lucrative if it is carried out correctly. But it’s also one of long hours, very hard work, and a lot of faith. As an entrepreneur and owner of a startup, the pressure is on you to make good decisions, as your livelihood (and the livelihood of others) quite literally depends on it.
The one thing that you want to do is avoid making the same detrimental mistakes that other startups have made in the past. The following pieces of advice will help you avoid making damaging mistakes early on in your startup’s life.
Make Sure Your Business Isn’t Too Niche
It is true that a niche project can be the ticket to a wildly successful business. The general thought process is that niche industries usually mean fewer competitors and a higher probability of making it big. But, the reality is that a truly good business model will always have competition. The true test is whether your product and business model will be strong enough to beat out the competition. Avoid making the mistake of starting a business with a niche so small that there is little to no possibility of long term growth.
Time Your Product (Or Service) Release Properly
Jonathan Wegener, founder of Timehop was quoted saying “”The biggest mistake I see is companies waiting too long to release the product.” This is absolutely true. Many founders and their founding employees get caught up in trying to release the perfect version of their product or service, and that can be hugely detrimental for their timeline. It’s important to take a step back and determine if the Minimum Viable Product has been created. If so, launch! All of the extra bells and whistles can be added on as your business moves forward; they aren’t important for your initial launch. Avoid wasting time and resources upfront; use your initial product to gain resources, a following, and investors.
Be sure to check back next month to see more tips to avoid the most common startup mistakes.
Social Media isn’t going anywhere. Many businesses are scrambling to try to figure out how to leverage the constant influx of new social media platforms to their advantage. This is proving to be easier for larger businesses and firms that have the marketing budget to research how social media can be used most effectively. Smaller companies and startups with smaller budgets generally do not have that luxury and are forced to figure out the world of effective social media on their own. There are a few things that startups can do, to make the most out of their social media presence:
Create A Social Media Marketing Plan
Many startups make the mistake of starting social media platforms for their company without a strategic plan. It’s important to establish a strategy so that you have actual goals to focus on and benchmarks to work towards.
- Determine what your goals are. Is it building awareness for your brand? Distributing content for your brand? Generating Leads for your business? A combination of the three? Make sure that you establish what you want to accomplish.
- Determine who target audience will be. What is their primary means of communication online? How do you plan to interact with them?
- Determine who will run your accounts. Make sure that whomever has access and posting privileges is aware of your objectives and procedures. The last thing that your company wants is to have a sloppy online presence.
Determine The Best Time to be Online
This is directly tied into the determination of the target audience. It’s important for startups to research when their customers are typically online. Make sure that time zones are taken into consideration when making posts, and do research on the specific social media platforms that are being used. For example: People may use twitter and facebook at different times and for different reasons. Research and metrics are a startup’s best friend when determining when to post.
Listen to Your Audience
Startups can really use social media as a platform to get direct feedback from their users & customers. Don’t just flood your platforms with information. Ask questions and ask for feedback. Focus on gathering replies and even criticism. If used properly, social media platforms can be mini online focus groups for your company.
For more tips on getting the most out of social media platforms, see these resources: