It’s unfortunate to see that most entrepreneurs don’t really know how to prioritize their expenses. Majority commit to expenses that end up draining their bank accounts leaving them at the mercies of loaners and shylocks.
One interesting thing to note is that a significant chunk of these blood-sucking costs is made up of non-priority issues. That is to say, you can actually survive without them and catch up on them a little later as your business stabilizes. Here are 4 examples of spending habits that can easily milk your business dry.
*Renting a Fancy Office in a Prime Location
You Say: I can’t operate without an office
If you are like most people, chances are that you are stuck in the 8am to 5pm psychological cycle whereby morning hours are for going to work and evening hours are for coming back home. It is therefore natural that you will frown at the idea of working from home (or restaurants) preferring to rent premises so you can have a “permanent” workspace in town.
The thing with renting office space, however, is that there is usually a long list of expenses that come with it. From the county license fees to furniture, service charges and goodwill – your small business will be under immense pressure to off-set recurring expenses.
Not only will that eat into your meager profits but it will also slow down your growth momentum and expose you to cash flow problems. If you can get away with working from home or in a co-shared facility, then do it for as long as possible. Keep your costs minimal for as long as you can. When your business begins to pay you back; you can think about committing to premises.
*Going for Expensive Office Furniture & Equipment
You Say: My office must have a swinging leather chair & flat screen TV
One challenge you will face as a small entrepreneur is that you will always have the pressure to prove your nemesis wrong. You want to assure your parents that your business is doing well even after you turned down that graduate job offer.
Also, you want to prove your ex-colleagues wrong by showing them that you can still afford to maintain the high standards you had attained at your previous job. The same goes for your clients – you want to create a lasting impression.
Now here comes the problem…you go for the most expensive hardwood furniture in town and drain your bank as you strive to achieve that “ideal image”. What you don’t know however is that in Kenya everyone is a hustler.
Your customers don’t worry so much about sitting on fancy leather chairs as they mind about quality, good customer service, timely deliveries, personalized attention and so forth. Your nemesis will still have issues with you no matter how successful you become.
Unless it is absolutely necessary to your production process, don’t buy that expensive iMac to do a job that can be done by a simple Lenovo laptop. Unless it will improve your sales, don’t invest in that 40-inch office TV. Spend your money on things that matter.
*Expensive Lifestyle
You Say: I can’t lower my standards; NEVER
In order to maximize on your chances of success you have got to learn to conserve cash religiously. You will need to find creative ways to survive.
If you are entirely dependent on this one business then its prudent to avoid some of the expensive habits you might have picked up along the way. Running a startup while at the same time servicing an expensive mortgage may not be the noble thing to do.
Those expensive meetings in expensive hotels can wait. That big car with a fuel guzzling engine can also take a back seat. Sure, your previous employer was the one paying your kids’ school fees at that expensive school – but now that you are on your own you might want to reconsider your options.
You don’t want an expensive lifestyle to wipe out your account balance and savings only to end up crawling back to your employer begging to be re-employed. Be wise, live within your means until your business can comfortably afford to give you even a better life.
Remember, a good entrepreneur is one who is ready to do what nobody else can so that he can live his later life like very few people can.
*Expensive Launches & Advertorials
You Say: We are going to start with a big LAUNCH at Kilimani
Marketing is indeed the backbone of every business. Without good market outreach efforts your business may not even see the light of day. In fact there is an old quote that goes “Running a business without advertising is like winking at a girl in the dark. You know what you are doing but she doesn’t have an idea that you are interested in her because she can’t see in the dark!”
On the other hand operating on an explosive marketing budget can lead you into a land of no return. Kicking off your startup with a big launch in some upmarket hotel and inviting the who’s who is no way to guarantee success. Printing all those calendars, diaries and fancy umbrellas to give to a market you are yet to build is rather unwise.
So forget about all the fanfare for a moment and settle for a more modest way to market. When you are a small business owner, you have to learn to knock on the right doors and literary push your products. Sometimes you will have to literary beg for deals.
So don’t be fooled into thinking that you only need to invest in an expensive marketing campaign and then sit back in the office waiting for orders to trickle in. You will be in for a rude shock. It’s rather wise to use a personalized marketing method that is both involving and cost-effective for starters.
Reserve those expensive product launches and advertisements for later.
Final Word
Just as individuals should live within their means, so should your business. Each stage of business growth has its core priorities. At the starting stage, the top priority is to overcome initial cash flow problems and achieve stability.
Stick to that and your business will survive beyond the mythical 2 year start-up deathbed. Get your priorities wrong and you will be lucky to survive for more than 6 months. All the best.
