11 Ways Startups Waste Their Money - Avoid These Mistakes!!

in this video I cover the top 11 ways startups waste their money so you can avoid costly beginner mistakes I'm a startup founder with multiple exits author of three books on building startups and an investor and more than 100 companies to put this video together I look back at my experience both with my own startups and also the startups I'm invested in then I went on Twitter and I asked folks for their examples and I got a bunch of really good suggestions and in fact more than half of these 11 were from folks on Twitter and so if you were one to suggest that I appreciate it and if we are not connected on Twitter I am at Rob Walling as well as at microconf the first mistake is scaling sales before the product is ready and it comes to us from Chris lukenbill mistake he's seen as hiring sales staff before you've sold consistently as a Founder because you're a developer and you feel comfortable building and not selling this also works for marketing as well and I have a sub bullet of this of just Staffing up in general before you've built something people want and especially if you raise buckets of money a big mistake I see see is people just hiring because they think they need to spend the money and you can raise money and still be a capital efficient or a mostly bootstrap company that operates in a way that doesn't waste money on status or lavish things that really aren't contributing to the bottom line it's nice to have the discipline of hiring slowly when you start to see a pain Point coming and not having to staff up before you really have any demand for your product our next one comes from Peter Boyer Peter says getting Starry Eyed about growth before you've got many or any paying customers and so engineering at Twitter scale rather than getting the foundations right this is called gold plating and it wastes a lot of money it's like putting gold plating on something you know just for the appearance of it and back in my Consulting days we would have some clients just tell us I want this to scale to 10 000 simultaneous users and we would say but you have no marketing and no audience like you can scale this up as you go but if they wanted 10 000 and they would pay for it it's something thing that I've seen and it definitely resonated with me when Peter said this because I've seen it in action mistake number three is overpaying for prestigious office space as a startup you're not a bank you're not a realtor you're not some office that needs to have a bunch of prestige because you're going to have clients or customers over as a startup that's operating on the internet and most likely selling your software to people who will never ever see your office you don't need to get an office on Wall Street or in Beverly Hills or in San Francisco you can go to kind of anywhere right I mean that's the beauty of bootstrapping and mostly bootstrapping you know I have seen startups where the owner somehow feels like they're not a real company unless they have this office space and they go and they do it and it's a huge waste of time and they sign a long lease and then they realize it's burning a ton of their money they've bought Furniture For Crying Out Loud and they find themselves really burning a lot more cash than they should have I'm not saying get a crappy office space but you can definitely get a nice office space if you need one in a place that maybe is not as prestigious as the you know the most prestigious building in town because there really is not a ton of purpose to it other than your own ego mistake number four is over hiring and this is different than mistake one which was hiring before your product is ready let's say your product is ready you have product Market fit and you start to scale up I have seen companies hire five people when they should have hired one was going to be a bunch of frothy churn with that many people trying to get started all at once and frankly there just wasn't enough real solid work for that many people to be doing it's easy to do when you're you raise 10 20 30 million dollars it feels a like you have infinity money but it also puts this pressure on you to spend and thankfully you know the bootstrapped in mostly bootstrap software Community doesn't usually do this the mistake we make is waiting a little too long to hire until things are on fire or until we're burning out but over hiring is absolutely a way that I've seen startups burn a lot of cash mistake number five comes to us from Nate Ritter and it's Building without talking to customers he says literally seen Millions wasted this way unfortunately this is all too common and it used to be more common let's say in the early 2000s before customer development came about Steve blank brought that concept to the startup space people really didn't talk to customers they kind of guessed and then they a lot of startups were built that just no one needed I think that jobs to be done and customer development have really pushed the startup space forward anyone who's around the space whether they do it or not they know that they should right and I do think that's a show of the maturation of this whole Space if you're not talking to customers and you think that you know what they want you think you know what the pain point is you're probably making a mistake mistake number six is hiring senior Talent too early I rarely see bootstrappers doing this but I have seen folks raise money even small amounts of money but especially when you start getting you raise a five or a 10 million dollar round and you think that you need to hire a c-level person a chief technology officer instead of just hiring a director or a VP or someone who can still kind of have some boots on the ground when you have two Engineers you you don't need a CTO you need a tech lead a Dev lead you need a manager of Engineers you need a director of engineer you know there's a title that's appropriate when you have two Engineers but you don't need a c-level person a true CTO in a major city is going to make hundreds of thousands of dollars frankly get a lot of stock options and is not something that is a good idea for an early stage startup stake number seven comes to us from Earthling works on Twitter and he says a mistake is working with the wrong people employees Consultants co-founders Partners even customers each can be good or bad and the bad ones are super costly I couldn't agree more and I don't know what else I need to say about this other than a mistake that Founders make around this is not cutting ties with people who are toxic or people who are not good for your company and this does mean customers this does sometimes mean co-founders this does sometimes mean employees consultants and agencies being disciplined about working with the right people can not only only save you a lot of money but it can save you time as well realize that bad hires and bad relationships they're just going to happen you're going to misjudge things things will change but you have to fix them quickly you have to learn how to hire slow and fire quickly mistake number eight is having growth efforts that oppose a company's strengths or their DNA and I like this one this isn't one that I had really thought about if you have a very sales driven organization and maybe one of the founders is a great salesperson it's likely that you're going to want to do sales and and lean into that if that's in your DNA versus going out and trying to do a bunch of SEO to get inbound traffic and to build a funnel like if you don't have the experience of that if that's not really you know part of who your company is it's maybe not something to do early on vice versa if you really are that marketer that does content and SEO trying to do outbound sales from scratch because you want a challenge or because you want to learn it is probably not a good early bet and so leaning into the things that are in your own DNA or your startup's DNA or something that can help you not make this mistake mistake number nine also comes to us from Earthling works on Twitter and it's having bad strategy he points out that execution is expensive and that execution doesn't matter when the direction is wrong this one's challenging I'm going to be honest because knowing if your strategy is right or wrong is not necessarily something that's easy to determine from the start relying on Old maybe trite things like well eat your own dog food and the product to sell itself and we don't need marketing you know these types of things aren't helpful I think this comes with experience I think it comes with developing your founder gut Your Instinct and watching others who do things successfully and trying to borrow their Frameworks and the way that they think about these difficult things like strategy going into a space and watching a company that has been successful and not just looking at the surface level the cargo quilting of it trying to talk to someone who used to work at that company listening to podcast interviews early on from when they were still struggling like there's ways to get at the truth of how people succeeded and using them to help improve your ability to think strategically is one way to avoid this mistake number 10 is from punchline copy and the mistake is using agencies that don't deliver she says paying agencies that promise the world and deliver anything from a mediocre website to a big wet nothing this is something I've dealt with I've experienced firsthand this is something I have seen our Tiny Seed portfolio companies deal with oftentimes the more expensive agencies do have minimums of let's say three months or six months know about that in advance when I hear an agency say they want a 12-month minimum that actually concerns me because I don't know if they're going to not be delivering for that full 12 months I have worked with agencies with amazing testimonials who've worked with people that I respect and then when we actually get into the process it turns out well their team expanded and they used to be five people and now they're 40 and so I'm working with a completely different team and what they deliver is not on par with what we wanted I don't think most do it on purpose but I think what happens is as agencies expand it's hard to be as good as the founders or that early team and so it's all too common to run in to this mistake mistake number 11 is doing brand marketing too early so there's direct response marketing where you ask for the sale and you track your conversions and you know how much you spend and how much money you're going to make from those customers and then brand marketing is just getting your name out there it's what Coca-Cola does it's what Crest and Procter and Gamble do when you're in your early days you can't afford to do brand marketing you can't afford to just run ads that just get your name out there because no one cares you have to really watch those dollars and cents and you have to really watch traffic your conversion rates and understand your funnel and I feel like Founders who maybe don't want to do that or they don't agree that marketing should be a thing or at their bones they want the product to sell itself maybe rely on just brand marketing of like if our names out there people will buy it unfortunately in most cases it's just not the way to go before we wrap I want to mention microconf masterminds so if you know what a mastermind is it's where two three four Founders get together and they support one another and they meet every week or every month and run through their Journeys together and at microconf we have a mastermind matching service it's at microconf masterminds dot com and every few months we do a matching process based on the phase that people are at the type of product location time zone there's a bunch of factors that we take into it but we hand match people and we have matched well over 600 Founders from 40 or 50 different countries and have literally hundreds of masterminds that are now operating with Founders supporting one another so if that sounds interesting to you head to microconfmasterminds.com if you enjoyed this video I'd love it if you'd hit the like button and subscribe to the channel we have videos coming out like this every week always packed with information always packed with tactics and strategies and hopefully inspiration for you as well I'll see you in the next video foreign [Music]

Channel: MicroConf

Views: 11,652

Keywords: MicroConf, Saas, how startups waste money, startups waste money, zero waste startups, costly mistakes, mistakes startups make, stop wasting money, startup mistakes, saas mistakes, business mistakes, saas money, saas cash flow, cash flow management, startup mistakes to avoid, starting a business mistakes, business mistakes to avoid

Id: Ud7LgKK3cK8

Length: 10min 57sec (657 seconds)

Published: Mon Sep 19 2022