Don’t burn your cash up

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by Tom Watson on July 22, 2010

When you are just starting your own business you really need to watch how much cash you are blowing on things that are not needed.

A few dollars here and there can sink you. I could spend hours and hours on this topic alone. I can’t think of anything that will sink your entrepreneurial ship any faster than spending your cash poorly.

Time and time again folks spend their profits on all the wrong items. Listen carefully to me.

Spend and reinvest wisely.

Only spend on what you need at the moment. You do not need the latest phone that acts as your robotic assistant. You do not need the latest laptop that is faster than what they have at the Pentagon. These gadgets and the many like it will only make it harder to ensure your long term survival.

Another way many people overspend is by being fooled by people who claim they can get customers for you. These folks come in all shapes and sizes. They will lead you to believe that they are the worlds foremost expert on the subject.

Some will want you to sign up for expensive Internet services and others will want to get you to advertise in just about any medium you can imagine. This would include church bulletins, large phone book placements and special newspaper supplements to name a few.

Allow me to be the first to tell you that I spent a small fortune on just about everything you can think of. I fell in love with what they were promising. But the promises never came true. The only thing I got in return was a smaller bank account.

When I explained that to the people I gave my hard earned money over to they said:

  • I needed to give them more money!
  • I needed to try harder!
  • I needed to just sign up for another three months, six month or a year.

Do not fall in love with a sales pitch. Save your money. If you want to give your money away at least give it to a charity that will do good deeds. Each dollar you waste is one you will have to re-earn. So unless you like to do everything twice, learn from my mistakes.

At the end of the day you want to watch your personal spending habits (fancy phones etc…) AND carefully dip your toes into some different forms of advertising to see what works for your situation.

Then keep immaculate records (of the advertising) so you can determine what worked and what didn’t. Keep it simple at first until you get some experience (and more cash) under your belt.

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{ 4 comments… read them below or add one }

1 Harry January 3, 2013 at 3:26 pm

Tom – Excellent advice. As they say – cash is king. It is even more applicable to start-ups and small businesses. We all know the story of the hot Internet company WebVan that burned through millions of dollars by spending lavishly and eventually shutting the doors.

Every start-up should keep the goal of becoming cash flow positive within 1-2 years.

2 Tom Watson January 3, 2013 at 3:47 pm

That story reminds me of a buddy of mine. He started a company, began making good money BUT instead of reinvesting in getting more and better accounts, he blew it on himself! Business didn’t last long of course. Now he has a job. Sadly many go down that road. Anyway…Thanks Harry!

3 Ti Roberts January 3, 2013 at 7:36 pm

Wonderful post, Tom. It’s so important to be mindful of what you spend your money on when starting a business, especially one online. I can’t tell you the thousands of dollars I’ve wasted on products and tools that I thought were going to help me build a successful blog.

Over time, what I realized that some of the best information that I needed was actually available for free. I just had to take the time and really research and educate myself to discover what was really worth spending my money on.

I appreciate you sharing your insights on this topic. I hope many others who may need the info find this post.


4 Tom Watson January 3, 2013 at 8:09 pm

Thanks Ti! I appreciate you stopping by to comment!

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