Rule number one: keep your money in the pocket

Share this article:

I would say that the most important tip I find myself repeating with my work with startups and young entrepreneurs: always keep your money in the pocket. Don’s spend it, don’t commit to any expenses, never buy whatever does not create more income than you spent.

As a young entrepreneur – either funded or not – you will get heaps of suggestions to help you: consultants, mentors, advisers, assistants, directors and of course incubators, accelerators, business clubs, events, conferences, etc etc etc. My tip is – consider very carefully what you are paying for, even if you have money in your bank account and just got funded: this money can be gone in a matter of weeks, I have seen cases of entrepreneurs that lost their business due to missing the very simple but true point: your task is to make your businessย earn money in profit rather than spending money.

About two months ago I met a super-smart entrepreneur in the Sydney CBD, in a high rise building just beside Circular Quay, which is one of the most expensive real estate in the world. The guy – phd in mathematics, asked if I wish to meet in his office, and we did. When I entered the floor we walked to the board room via the office space – which was completely empty. “Yes, he explained, we had to cut most of our employees once we spent all our $5M investment, and this office… well – the landlord insisted on a 5 years lease, and the CMO insisted we will have an office in the CBD, so here you go, I’m left with two more years of a lease of $7,500/month – but no employees to use this space”.

I’m not a math phd but I know that $7.5k doubled by 12 doubled by 5 is $450,000 – almost 10% of how much his company raised, that’s a lot for an unused office! Furniture, computers, renovation must have cost another $100k, no wonder they managed to burn $5M in two years and finish the runaway without a proper product.

Since then my friend and his co-founder were doing coding and marketing themselves, and managed to launch their product and start earning.

Lesson learned, my recommendation to any entrepreneur is to be very careful with any type of expenditure:

  • Always prefer a lean operation over a fat one.
  • Avoid show off expenditure – fancy offices, fancy equipment, even if you are funded.
  • Look for programs and events thatย pay you money / grants, not those that are designed to take your money
  • If you pay for an event or an activity, make sure it is a niche event for your target market, something that may produce your clients and income rather than fancy people to rub shoulders with.
  • Avoid like fire any external APIs which you could develop yourself – like – registrations API, mailing API, login APIs, caching services,… all those could be developed easily and cheaply and actually increase your tech stability and intellectual property.

Good luck ๐Ÿ™‚


Share this article:



You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *