In reviewing the financial state of my company, I was gutted to see the things I had paid money for that I never used or that simply didn’t pay off. They include:
- Beta agreements
- NDAs (non-disclosure agreements)
- A bad hire
- Events/travel that came to nothing
- Marketing materials that were off the mark or unnecessary
- Web and product development too early
And I’m sure there are other things so painful I blocked them out.
This is not to say of course that all of these things would always be a waste of money. Beta agreements and NDAs certainly do have a time and place, for example, as do marketing materials. But making good judgements about what to spend limited startup funds on and getting the balance of investment to return can be tricky.
In the true spirit of entrepreneurship I try not to wallow in regret of the money down the drain. I aim to learn from my mistakes and apply the learning to make better spending decisions next time.
I didn’t fail, I paid for a lesson….
These are the lessons I have paid for (so hopefully you don’t have to!):
- Search for sources of free legal documents. They do exist. Reliable, community-endorsed ones are easy to spot by checking into conversations on startup and entrepreneurial forums.
- Share the materials and resources you acquire with your startup community. I may have paid for an NDA, but I am happy to share it with another entrepreneur, cuz no doubt she (or someone else in the karma soup) will return the favour in future. There is always room for quid pro quo in startup life.
- Fire fast, and put it in writing from day 1. Hiring is notoriously difficult. The common mantra is “Hire slow, fire fast”. When you’re starting out, sometimes you have to get the help in quick when things start to take off, or when you’re stuck without an essential skill set. Or, sometimes you think you have spent plenty of time getting to know the person before hiring and it still goes horribly wrong. But if you put a hire agreement in from the first day the new person is doing any work, then you are protected against all eventualities should the arrangement go pear shaped. You will both know exactly what the financial liability will be at any point if ties have to be cut. Trust your gut quickly. You will know early on, even if you are trying to fool yourself or hide in denial, that a hire is not right.Get rid- asap.
- Choose events wisely and do your homework beforehand. Events can be expensive, but even free ones require travel and sometimes accommodation costs. Adverts for things like trade shows can be very compelling. Everybody who’s anybody will be there. It will be the centre of the [insert your target industry here] universe. Opportunities for promotion and sales will abound. Maybe. But it may be just another dog and pony show for vanity set with the latest and coolest swag and eye-catching banners. Without a crystal ball, it can be incredibly difficult to discern if spending money on travel and attendance will be worth it. Some tips: look into the organisers of the event- do they do this every year? Can you speak to someone who has gone to a previous one? Are the sponsors well-known and well-placed for your target market? If you decide to go, set really clear goals for what you want out of it when you get there, and commit to putting in the effort to achieve them. I wrote previously about feeling like a fish out of water at Web Summit. But while I was there, I met a woman who had set herself the goal to meet 20 new people every single day. And she did it. She got a lot out of her financial investment in attending. I did not. Research attendees and seek out the most relevant ones to introduce yourself to. Make contacts, and follow up with them afterward.
- Invest in marketing materials that are as widely appropriate and transferable as possible. I still struggle with good judgement around marketing materials. Are they really necessary? In what form? When should I spend big bucks on a great design? In what situation are they most relevant and impactful for dissemination? There have been times when I have paid out for glossy fliers to hand out at ill-fated events as described above. There have been times when I was at the perfect event and had no materials, or worse, embarrassingly poor materials to share. My lesson here is to pay a good designer to do a minimal design of eye-catching and relevant imagery with just the bare information essentials for your business– who you are, what you do, and how to find you. They will then be to hand in any eventuality.
- And never forget your agile and Lean Startup lessons: stick to the MVP and only develop once you have validated new features with real customers.
The overall lesson I learned from my review is- decisions about spending money in a startup is all about balance for good return on investment. And getting the balance right in all these areas is tough! I always try and remind myself of these lessons when I find myself facing spending decisions, and I do still get it wrong. But that’s ok. Learning is a big part of what being a startup entrepreneur is all about. As long as I use discernment, do my research, listen to my gut, and talk to my network, I am pretty sure I can minimise any decision that might be too disastrous.
My new book , Becoming a Fearless Leader: A simple guide to taking control and building happy, productive, highly-performing teams will be launched next week. You can sign up here to get access information for free materials from the book.