5 Things You Shouldn’t Spend Money On When Starting a Business

Some things are worth spending your money on. Others aren’t.

Worth it:

Not worth it:

When starting a business, here are 5 things you shouldn’t spend a lot of money on:

Fancy shmancy marketing materials. Brochures, pamphlets, and other uber-glossy, 4-color ultra high-end print materials are too expensive when first starting out. Go the blogging route for a bit of marketing muscle and exposure. Do a little homework on SEO and targeted advertising through Google Adwords before spending on printed marketing materials. If business cards are a must (and they typically are) try an online service like Great FX Business Cards where you can design your cards online.
Software. I’m not advocating the use of pirated software, but there are plenty of online tools that are inexpensive or free, and can be just as effective for starting up your business as more traditional software. Ex. Google Spreadsheets, Writely, Blinksale, StikiPad, Skype…
Advertising. It may depend somewhat on the business, but advertising is a tough way to go off the bat. It’s going to be very expensive and with an early business probably not generate the returns you want. Instead, try public relations (PR). PR is less expensive and can be effective at generating buzz/awareness and direct leads. Try generating referrals and networking, which usually involve a ton of work but little cash upfront.
Office space. Typically one of the biggest expenses when running a small business. Avoid it if you can. Go virtual. Go home office.
Staff. You may need to bring people onboard right away, but if you can outsource, try that first. Definitely outsource things like accounting, bookkeeping and other non-essential functions. Get good referrals, negotiate good pricing and barter if you can. This is where your network will play a huge role. If you’ve got contacts or friends willing to provide these services for free or at a greatly reduced price, all the better! For essential services, if you do have to hire people, think sweat equity. You might not be comfortable taking on partners, but if they’re minority stakeholders it might be worth the cut in payroll.

Don’t Forget: It’s Blog About 5 Things Week! Join the fun by writing a post on 5 things; 5 tips, 5 steps, 5 ideas, etc. Link back here to tell me about it… Read More!

Photos by Kleiobird and idreamofcaffeine on Flickr

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October 2, 2006 Posted in Entrepreneurship by Ben Yoskovitz

http://doomedstartup.com Zak

I agree that spending a lot of money on software is a mistake for most businesses, especially new ones, but I’m not sure I’d suggest web-based office tools like Writely and Google Spreadsheet over the equally free, but more traditional Openoffice.org for most businesses.
http://doomedstartup.com Zak

I agree that spending a lot of money on software is a mistake for most businesses, especially new ones, but I’m not sure I’d suggest web-based office tools like Writely and Google Spreadsheet over the equally free, but more traditional Openoffice.org for most businesses.
http://www.instigatorblog.com Ben Yoskovitz

Zak – thanks for the comment and recommendation. I’ve never used OpenOffice but I’ve heard a lot about it.

I wasn’t listing a definitive group of recommended software applications, only providing some examples of Office-related tools that are free/inexpensive and decent at doing the job.

OpenOffice could have easily been listed there.

I hope you enjoyed the post and keep on coming back — I’m off to check out doomed startup now!
http://www.instigatorblog.com Ben Yoskovitz

Zak – thanks for the comment and recommendation. I’ve never used OpenOffice but I’ve heard a lot about it.

I wasn’t listing a definitive group of recommended software applications, only providing some examples of Office-related tools that are free/inexpensive and decent at doing the job.

OpenOffice could have easily been listed there.

I hope you enjoyed the post and keep on coming back — I’m off to check out doomed startup now!
http://bialoglowy.blogspot.com MB

Base on my experience having good brochures and business cards is quite important, at least in consulting business. I think still depends on the country, but in majority of Asian countries things like that are important. People are simply very visual in this region of the world and they’ll judge you by the design of your brochures rather than your offer. Thus, I think all this depends on the type of business you’re running and your location.

However, I must admit that if your business model is wrong, you won’t make it better with expensive brochures and high quality business cards. So, the business model is the most important and if it is good enough it is possible to succeed even without good branding.
http://bialoglowy.blogspot.com MB

Base on my experience having good brochures and business cards is quite important, at least in consulting business. I think still depends on the country, but in majority of Asian countries things like that are important. People are simply very visual in this region of the world and they’ll judge you by the design of your brochures rather than your offer. Thus, I think all this depends on the type of business you’re running and your location.

However, I must admit that if your business model is wrong, you won’t make it better with expensive brochures and high quality business cards. So, the business model is the most important and if it is good enough it is possible to succeed even without good branding.
http://www.instigatorblog.com Ben Yoskovitz

MB – thanks for the feedback. It’s interesting that you mention potential cultural differences to what’s important in starting up a business. Anyone else want to add their thoughts in about that?

I see you’re in Jakarta. I’ve been to Bali, Indonesia before – it’s an amazingly beautiful spot.
http://www.instigatorblog.com Ben Yoskovitz

MB – thanks for the feedback. It’s interesting that you mention potential cultural differences to what’s important in starting up a business. Anyone else want to add their thoughts in about that?

I see you’re in Jakarta. I’ve been to Bali, Indonesia before – it’s an amazingly beautiful spot.
http://innovationzen.com Innovation Zen

I think point 3 is a very important one. Even more if we consider web-based companies. With the right approach one should be able to create a lot of buzz around his product leveraging social networks.
http://innovationzen.com Innovation Zen

I think point 3 is a very important one. Even more if we consider web-based companies. With the right approach one should be able to create a lot of buzz around his product leveraging social networks.
Big Dan

The entire post should have started with the first sentence of Point 3, “It may depend somewhat on the business…”
Going “virtual” will not work if target customers are not online.

Using “free” software can add up to lost efficiencies if they don’t do the job or require special training. Again “It may depend somewhat on the business…”, if the potential staff knows MS Office front-wards & back then using something cheaper or free will cost down the line on production. MS Office Standard can found for under $300. I am no big fan of Microsoft but if it is apparent the group I am thinking of hiring cannot afford a $300 investment in software I start to wonder about their financial health and if they are going to be around for the duration of the project or services.

While I agree with part of the recommendations regarding staff and I think advertising can be ineffective, all 5 points relate to customer’s perceptions. If a company being considering has zero marketing materials (or collateral that is easily identified as on-the-cheap), is using freeware, works from home and has “vapor-staff” they better have a very unique product/service or they will be staying home.
Big Dan

The entire post should have started with the first sentence of Point 3, “It may depend somewhat on the business…”
Going “virtual” will not work if target customers are not online.

Using “free” software can add up to lost efficiencies if they don’t do the job or require special training. Again “It may depend somewhat on the business…”, if the potential staff knows MS Office front-wards & back then using something cheaper or free will cost down the line on production. MS Office Standard can found for under $300. I am no big fan of Microsoft but if it is apparent the group I am thinking of hiring cannot afford a $300 investment in software I start to wonder about their financial health and if they are going to be around for the duration of the project or services.

While I agree with part of the recommendations regarding staff and I think advertising can be ineffective, all 5 points relate to customer’s perceptions. If a company being considering has zero marketing materials (or collateral that is easily identified as on-the-cheap), is using freeware, works from home and has “vapor-staff” they better have a very unique product/service or they will be staying home.
Matt A

Dear Ben,

Please save me money and fix your “home office” link. It’s item #4.

xoxo,

Matt

ps – nice blog
Matt A

Dear Ben,

Please save me money and fix your “home office” link. It’s item #4.

xoxo,

Matt

ps – nice blog
JonQTaxpayer

I agree with most of your points, but the office one needs more explaining. I’ve found that without a designed place to work that is outside of the home setting, it’s too easy to get distracted from real work. Having a place where all of the principals of the business can come together and work at the same time, whether it’s someone’s garage or cheap rented space, can add a motivating push to get work gone. When you are sitting across from someone who is working the peer pressure can keep you on track.
JonQTaxpayer

I agree with most of your points, but the office one needs more explaining. I’ve found that without a designed place to work that is outside of the home setting, it’s too easy to get distracted from real work. Having a place where all of the principals of the business can come together and work at the same time, whether it’s someone’s garage or cheap rented space, can add a motivating push to get work gone. When you are sitting across from someone who is working the peer pressure can keep you on track.
Johnny Branson

I agree with #3… Advertising is expensive. Small business owners should take a look at Fast Pitch (www.fastpitchnetworking.com). It’s an online destination likened to eHarmony for Buiness. It takes information about your business and recommends leads to you. They also host events (virtual and offline).

Also, sites like LinkedIn, Jigsaw and Ryze offer a variety of ways to connect as well.

Regardless of how you go about it… there are ways to create word of mouth (buzz) without breaking the bank.
Johnny Branson

I agree with #3… Advertising is expensive. Small business owners should take a look at Fast Pitch (www.fastpitchnetworking.com). It’s an online destination likened to eHarmony for Buiness. It takes information about your business and recommends leads to you. They also host events (virtual and offline).

Also, sites like LinkedIn, Jigsaw and Ryze offer a variety of ways to connect as well.

Regardless of how you go about it… there are ways to create word of mouth (buzz) without breaking the bank.
AoE

If you’re starting a business, and remotely serious about it, you *don’t* want to use Google apps, or any other other app that stores content on someone else’s servers for you… unless you find it acceptable to allow another company to keep your confidential documents for you… Instead why not recommend OpenOffice? Sure I realize it’s not web2.0 and thusly not half as cool for you kids… but it’s open source, so that’s good for something, right?
AoE

If you’re starting a business, and remotely serious about it, you *don’t* want to use Google apps, or any other other app that stores content on someone else’s servers for you… unless you find it acceptable to allow another company to keep your confidential documents for you… Instead why not recommend OpenOffice? Sure I realize it’s not web2.0 and thusly not half as cool for you kids… but it’s open source, so that’s good for something, right?
http://www.instigatorblog.com Ben Yoskovitz

Innovation Zen – thanks for the feedback. Many (at digg.com) have said advertising is a must and very important. It has it’s place, and for a local mom-and-pop shop, an ad in the yellow pages may do the trick.

But you’re right, there are other ways of generating buzz, and while some say, “blogs aren’t for small businesses or mom and pop operations” I’d disagree.

Look at the buzz this post has generated on digg. Granted, a lot of the comments there are openly hostile, but it’s still buzz…

Hope to see you around some more!
http://www.instigatorblog.com Ben Yoskovitz

Innovation Zen – thanks for the feedback. Many (at digg.com) have said advertising is a must and very important. It has it’s place, and for a local mom-and-pop shop, an ad in the yellow pages may do the trick.

But you’re right, there are other ways of generating buzz, and while some say, “blogs aren’t for small businesses or mom and pop operations” I’d disagree.

Look at the buzz this post has generated on digg. Granted, a lot of the comments there are openly hostile, but it’s still buzz…

Hope to see you around some more!
http://www.instigatorblog.com Ben Yoskovitz

Big Dan – You’re right. I could have prefaced the entire post and said, “depending on your business…” but I think you could do that for almost any subject, and in a way that diminishes from the focus of the post itself.

There’s lots of extremely successful “virtual companies” — true, most are in the tech/software/web field (which is also where I spend most of my time.)

If, for example, your business relies on meeting face-to-face with clients, and they want to see an established location, or you’re in retail (obvious), then an office suddenly becomes much more important.

So, yes, it does depend. But, I don’t think we can de-value those that work at home or in virtual offices; cause there are plenty that do quite well for themselves.

Thanks for stopping by, I hope you’ll stick around!
http://www.instigatorblog.com Ben Yoskovitz

Big Dan – You’re right. I could have prefaced the entire post and said, “depending on your business…” but I think you could do that for almost any subject, and in a way that diminishes from the focus of the post itself.

There’s lots of extremely successful “virtual companies” — true, most are in the tech/software/web field (which is also where I spend most of my time.)

If, for example, your business relies on meeting face-to-face with clients, and they want to see an established location, or you’re in retail (obvious), then an office suddenly becomes much more important.

So, yes, it does depend. But, I don’t think we can de-value those that work at home or in virtual offices; cause there are plenty that do quite well for themselves.

Thanks for stopping by, I hope you’ll stick around!
http://www.instigatorblog.com Ben Yoskovitz

JonQTaxpayer – You’re right. Meeting face-to-face is hard to beat. Sure, you can use tools like Skype for video conferencing, but it’s hard to replace the touchy-feely benefits of in-person get-togethers.

And, I bet many people would agree with you: working at home is hard. But lots of people do it. I’d recommend the link I have in the post – visit Joe’s site. Check out Wendy’s site at http://www.emomsathome.com too.

It’s not for everyone, but it can work.

Thanks for participating in the discussion!
http://www.instigatorblog.com Ben Yoskovitz

JonQTaxpayer – You’re right. Meeting face-to-face is hard to beat. Sure, you can use tools like Skype for video conferencing, but it’s hard to replace the touchy-feely benefits of in-person get-togethers.

And, I bet many people would agree with you: working at home is hard. But lots of people do it. I’d recommend the link I have in the post – visit Joe’s site. Check out Wendy’s site at http://www.emomsathome.com too.

It’s not for everyone, but it can work.

Thanks for participating in the discussion!
http://www.instigatorblog.com Ben Yoskovitz

Matt A – link fixed! Sorry! And Thank You!
http://www.instigatorblog.com Ben Yoskovitz

Matt A – link fixed! Sorry! And Thank You!
http://www.instigatorblog.com Ben Yoskovitz

Johnny Branson – thanks for the links. I use LinkedIn but not the others. I have heard good things about JigSaw, mostly because you have to pay to play so the quality of people in there is higher.

Thanks for joining the discussion…
http://www.instigatorblog.com Ben Yoskovitz

Johnny Branson – thanks for the links. I use LinkedIn but not the others. I have heard good things about JigSaw, mostly because you have to pay to play so the quality of people in there is higher.

Thanks for joining the discussion…
http://www.instigatorblog.com Ben Yoskovitz

AoE – I used those links as examples, I wasn’t absolutely recommending those services.

But I appreciate that you called me a “kid” — makes me feel young!

Someone else recommended OpenOffice too. I haven’t used it, but I’m all for finding alternatives that work.

I do understand your concern about content storage, but in this day and age I think the “software as a service” model is generally recognized as being advantageous for certain things, even with certain drawbacks. But, it’s a concern worth nothing.

One last point – I’m not a “Web 2.0″ fanatic, far from it. I want software that works well / does what I need it to do. There’s some Web 2.0 stuff that’s like that, and other stuff that’s junk. That’s always the way it is with software, whether it’s Web 2.0, Web 1.0 or desktop-based.

Keep on coming back and thanks for joining the discussion!
http://www.instigatorblog.com Ben Yoskovitz

AoE – I used those links as examples, I wasn’t absolutely recommending those services.

But I appreciate that you called me a “kid” — makes me feel young!

Someone else recommended OpenOffice too. I haven’t used it, but I’m all for finding alternatives that work.

I do understand your concern about content storage, but in this day and age I think the “software as a service” model is generally recognized as being advantageous for certain things, even with certain drawbacks. But, it’s a concern worth nothing.

One last point – I’m not a “Web 2.0″ fanatic, far from it. I want software that works well / does what I need it to do. There’s some Web 2.0 stuff that’s like that, and other stuff that’s junk. That’s always the way it is with software, whether it’s Web 2.0, Web 1.0 or desktop-based.

Keep on coming back and thanks for joining the discussion!
http://www.fivebyte.com Toggo

Very informative! Nice subject. The first year of business is usually the make or break year. Anything you can do to cut costs and keep your head above the water is a good thing. Try to focus on the main goal and not get distracted by trivialities.
http://www.fivebyte.com Toggo

Very informative! Nice subject. The first year of business is usually the make or break year. Anything you can do to cut costs and keep your head above the water is a good thing. Try to focus on the main goal and not get distracted by trivialities.
http://workingathomeinternet.com/WP Joe

Hey Ben,

These are some great tips, I like #4 best.

Thanks for the nod.

Joe
http://workingathomeinternet.com/WP Joe

Hey Ben,

These are some great tips, I like #4 best.

Thanks for the nod.

Joe
http://www.instigatorblog.com Ben Yoskovitz

Toggo – glad you liked it. I hope you’ll participate in the Blog About 5 Things Week!

Joe – anything I can do to help. It was a casually placed link, but strategic too. I’m glad it worked for you…
http://www.instigatorblog.com Ben Yoskovitz

Toggo – glad you liked it. I hope you’ll participate in the Blog About 5 Things Week!

Joe – anything I can do to help. It was a casually placed link, but strategic too. I’m glad it worked for you…
Robert Johansen

I would just like to point out that there is a big difference between “ex.” and “e.g.”. When doing business correspondence, make sure you’re using the correct one.
Robert Johansen

I would just like to point out that there is a big difference between “ex.” and “e.g.”. When doing business correspondence, make sure you’re using the correct one.
Pier-Luc Caron St-Pierre

Use free software is a nice tips. But for a business we must respect the license agreement. I read the licesnse agreement of Skype and it don’t authorize the usage of Skype for commercial use =(. Please, watch the license agreement.

PL

PS : Sorry for my bad english.
Pier-Luc Caron St-Pierre

Use free software is a nice tips. But for a business we must respect the license agreement. I read the licesnse agreement of Skype and it don’t authorize the usage of Skype for commercial use =(. Please, watch the license agreement.

PL

PS : Sorry for my bad english.
http://www.paystage.net Dan

With regards to Point 5 always refer to services like http://www.elance.com and http://www.guru.com. great for pricing estimates and sourcing capable providers.

Regards,

Dan
http://www.paystage.net Dan

With regards to Point 5 always refer to services like http://www.elance.com and http://www.guru.com. great for pricing estimates and sourcing capable providers.

Regards,

Dan
http://www.myownshit.dk myownshit.dk

Love the advices. I have found something similar on the internet before, but never this many advice at one place. Good work.
http://www.myownshit.dk myownshit.dk

Love the advices. I have found something similar on the internet before, but never this many advice at one place. Good work.
http://www.chowrangi.com Kashif

Working location and enviornment is most important IMHO. If you are working from home, make sure you have got sound proof room where you can concentrate on work. A crying child, talking spouse or yelling TV next room can destroy the working mood.
http://www.chowrangi.com Kashif

Working location and enviornment is most important IMHO. If you are working from home, make sure you have got sound proof room where you can concentrate on work. A crying child, talking spouse or yelling TV next room can destroy the working mood.
http://www.sajshirazi.blogspot.com shirazi

Nice assertion here.
http://www.sajshirazi.blogspot.com shirazi

Nice assertion here.

Ben Yoskovitz

I'm VP Product at GoInstant.

I'm also a Founding Partner at Year One Labs, an early stage accelerator in Montreal. Previously I founded Standout Jobs (and sold it). MY BIO >>

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