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Not Spending It

Do not spend the money you receive for your startup.
The line above will raise many eyebrows. Many of you will question whether I’ve gone insane or what. Without spending money how can run your startup? But my friends this is the truth.

Most of the startups that fail are because of lack of money. They get money, spend it and then run out of money. No money to run your startup means no business and eventually the startup dies. If this is the reason behind many unsuccessful startups, then isn’t it wise to avoid it?

Many startups try to get bigger fast. Such a plan means getting more customers and for that you need more people for marketing which means more hiring. Hire more people and spend more dollars from your budget.

But getting all the customers first and leaving none to the competitors may not always bring the benefits to you. In some of the markets it may be true but not in all markets and not always. Google started their venture in 1998  which was little late for a market like search which was dominated by big brands such as Yahoo, Altavista, Lycos, Infoseek, Excite, Inktomi and others. But even then Google won the race because they made something better for the customers. As I mentioned in the section “What customers want” offering a product which is better then other exiting product is more important.

Instead of spending millions on advertising and getting a big workforce, Google’s competitors could have focused more on their products and improving the quality. Advertising is necessary but it should not be the main concern of a startup. The startups which use huge advertising projects and huge advertising budget are actually run by marketing people and often end up in disastrous conditions.

It is always better to grow slowly. Growing slowly helps in many ways –

1. It saves money;
2. You learn all the jobs needed for running a business;
3. You gain experience in other aspects of a business;
4. You acquire various talents.

Among the founders, one may be good at sales, one may be at customer support and another may be at writing codes. You can utilize the expertise while deciding on the roles. Growing slow by the word of mouth is always the best. During the early stages of development, you need people who will find your product, use it, love it and then spread the good words. Such users are also necessary to find out how your product is, what are the good points and what you need to improve. Depending on their feedback, you can make changes in the product to make it most desired and the best. Talk to your customers and find out what their needs are. It is ultimately “What customers want” that you need to create to be successful.

You first need to understand your business and then only, you can be successful in it. Google was successful because they understood search and their competitors did not. Yahoo did not understand the value of search and the need to improve search until Google took away its share.

You will always have to put your users ahead of anything, even before  the advertisers who are paying you. The reason is simple- it is the users who actually decide whether your product is successful or not. Google made it simple and easier for the users without putting more emphasis on the advertisers. Once you get the users, the advertisers will follow. If you do not do it and there is a gap, others will do it and fill the gap.

You need to be economical and develop a culture of economy. This is another reason to spend less money or spending it slowly. Such a culture helps you to grow better without wasting money. It will help the whole organization to work towards one goal without having any friction. If you have an economical option of doing something which does not affect the quality, then you should do it.

When you get funding of few million dollars, you may tend to feel rich. So, when you start feeling this way, ask yourself a question- are you really rich? Ask yourself whether this money is yours and if this is your profit. This money is not the revenue for you. This is your investor’s money which is given to you to use in the business to come up with better returns. You are not yet rich but poor.

Try to be cheap yet cool. Remember to be as cheap as possible while dealing with your business offices and other not so value adding attributes. Do not go for flashy offices when you have just started out. Even if you do not have the latest chairs and wall painting, then also your business will do well. So, keep your office and personal expenditure to minimal and invest more in the business. If you can do without something, then better avoid it.

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