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Stay lean and ready for the unexpected by avoiding these common financial missteps

Question: What is one major spending mistake entrepreneurs make unintentionally?

Paying too much in merchant account fees

“One critical component in your business is how you collect money from your customers. A large piece of that for, many companies, is credit card processing. As someone in the industry, I know how costly it can be to make a knee-jerk decision to set up what is quick and has a simple pricing model, rather than finding a reputable rep to save you on fees.”

– Darrah Brustein (@DarrahB), Network Under 40 / Finance Whiz Kids

Hiring the wrong coach

“Business coaching is a huge business and it’s easy to get swept up into making a five-figure investment without considering what your business needs most. Be willing to take your time, really research a coach’s reputation and get the right fit.”

– Kelly Azevedo (@krazevedo), She’s Got Systems

Paying for services that charge monthly

“Services that charge monthly can become a financial drain. The prices don’t seem high but when you multiply everything by 12 months, but these benign costs can really add up. A lot of early stage entrepreneurs are not tight enough on costs. Imagine if you had found enough savings to hire another employee. I’d much rather have another great employee than a bunch of rarely used services.”

– Luke Skurman (@lukeskurman), Niche.com

Also Read: Worldwide IT spending to decrease in 2015: Gartner

Spending too much on rent

“Getting a cool office at the beginning might seem like a great idea. You can afford it this month, but can you really afford it for the next year or two? I have seen people who have glamorised the “startup lifestyle” and believe cool offices are a necessary part of it. That couldn’t be further from the truth. You can change the world straight from your garage.”

– Kenny Nguyen (@bigfishpresco), Big Fish Presentations

Paying unexpected legal expenses

“What may seem like a simple legal question can result in a 20 page memo and a US$3,000 invoice. Some attorneys are willing to offer project rates or a cost cap on a project to help you budget your legal expenses. It is worth asking your attorney if they would consider a project rate or cost cap fee arrangement. After all, if you don’t ask, you don’t get.”

– DougBend (@DougBend), Bend Law Group, PC

Hiring a PR firm right away

“All too often early-stage entrepreneurs are enticed by the glamour and recognition of articles, awards and credentials, and hire a pricey PR firm in excitement. However, it is critical to resist that urge and let your work be your calling card. If the energy and passion you put into your work shows then the awards and recognition will follow organically.”

– Kim Kaupe (@kimkaupe), ZinePak

Also Read: Fireside Fridays: Bangalore gets US$2.6B, spending seed money & more

Not keeping track of small subscription fees

“A SaaS CRM is US$40 a month, hosting is US$50 a month, social media management might be US$20. Keep track of these in a spreadsheet so you know when your recurring outlay is getting too high and what you can consolidate. If you don’t, you’ll quickly find yourself spending several hundred a month for a package of services, half of which you might not even really be using any longer.”

– Brian Fritton (@bfritton), Patch of Land

Overspending

“Know your budget numbers day in and day out and don’t spend on things you absolutely don’t need. Did you check the shipping rates with multiple carriers? Are you making more than you’re spending? Numbers don’t lie. Get it together from the beginning and don’t sway from it. Hold your ground and make tough decisions if you have to.”

– Mark Samuel (@markalansamuel), Fitmark

Having Liberal Hiring Policies

“When you’re first starting out, avoid unnecessarily inflating your employee head count. While it may be nice to have an office manager, an administrative assistant and a dedicated HR person, most of those tasks can either be outsourced or handled as shared responsibilities. Limit your overhead and operate lean because profitable businesses are ones with true staying power.”

– Firas Kittaneh (@firaskittaneh), AstraBeds

Also Read: Indonesian digital ad spending prediction in 2015

Signing Endorsement Contracts

“If a celebrity or expert takes an interest in your business, its tempting to sign them to endorse your product. An endorsement alone is not going to sell your business — you still have to build awareness and market the product. Endorsement deals are often seen as a silver bullet when, in reality, they cost a lot and offer little return if you don’t support it with marketing and operations.”

– Angela Harless (@AngHarless), AcrobatAnt

Overspending on Cellphones

“Cellphones are expensive, but your employees need them to interact with customers. Make sure you get a corporate wireless plan. If you don’t qualify for one, then go with a less expensive prepaid plan.”

–  Lane Campbell (@lanec), Creately

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Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. YEC members generate billions of dollars in revenue and have created tens of thousands of jobs.

The Young Entrepreneur Council (YEC) is an invite-only organisation comprising the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship programme that helps millions of entrepreneurs start and grow businesses.

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