40 Ways Small Business Owners Waste Their Money : Under30CEO 40 Ways Small Business Owners Waste Their Money : Under30CEO
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40 Ways Small Business Owners Waste Their Money

| November 15, 2011 | 38 Comments

wasting money

We were curious to see where business owners waste the most money in the early days. So we reached out and asked what small business owners thought was the #1 biggest money waster for small business owners. Some common answers focused on different aspects of office space, marketing and hiring staff. Hopefully this list can help you avoid some of these mistakes and help you better invest your businesses money.

1. Bad Advertising – Most new small business owners get bombarded people trying to sell ad space. Do your research and determine if your customer profile matches that of the publishers audience. And don’t commit to long term anything. If they stand behind their product, they should allow you to test it for your business. Chris Sonjeow of LoveBookOnline.com

2. Space is the biggest and most common money waster I’ve seen for small businesses / entrepreneurs in my 22 years of business experience. I’ve seen supposedly educated business people and naïve newcomers overpay, overbuild and overspend on buildings, lease, rent storefronts, leasehold improvements, fixtures, and signage. Rich Patterson of PattersonBrands.com

3. The place I’ve seen my clients waste the most money is in paying for custom websites they don’t need. There are a lot of great companies offering template-based solutions for all kinds of sites now that will keep a small business’ costs down while they’re learning what they need in a site. Leona Laurie of ohleona.com

4. The number 1 waste of money for a young startup is either developing a business plan or outsourcing front-end development. The first wastes your time and money since investors typically only require a 1-pager to vet your company, and the latter (if you’re building a web-app) proves that your team is not adequate and will most likely get outperformed by your peers. Mike Ivey of RentSavvy.com

5. Non-Measurable Marketing, Advertising & PR* – One of the biggest money wasters is hiring a PR, marketing or advertising firm to help get the word out in which performance is not easily measurable and the firm is not held accountable whatsoever to performance. Ryan S. Himmel of BIDaWIZ.com

6. In many cases I think overstaffing is an area where small businesses or early stage entrepreneurs waste money. Without compromising quality, the owner of a brand new business should try to do as many things on their own as possible and use temporary help or freelancers. Jacqueline Trotta of MuseumWayPearls.com

7. Without a doubt it’s all the trappings of business – this piece of equipment, or that shiny piece of marketing material that you’re not even sure how ou’re going to implement. You probably don’t need any of the following: new computer, new desk, new suit, new haircut, new anything. Kane Jamison of HoodWebManagement.com

8. Ill-spent marketing money. Entrepreneurs often spend money on marketing before they can answer the most important question: Why should a prospective customer buy my product or service rather than my competitors? Step two: How do I reach the segment of the market that would be interested in what I have to offer. Doug and Polly White of WhitestonePartnersInc.com

9. Legal fees for start-ups can suck up thousands of dollars in costs. I’m not a lawyer and this isn’t legal advice, but entrepreneurs can likely take care of the incorporation paperwork without lawyers. Entrepreneurs also get basic protection for trademarks and copyrights without paying to for a federal filing, which may be sufficient before these materials have been proven moneymakers. Alan of InterviewSuccessFormula.com

10. One of the biggest ways for a small business to waste money (fast) is by running a pay per click campaign without any knowledge of how to manage it. PPC is great, but if you are not sure how to set a campaign up correctly, it is probably something you should be outsourcing. Chris Wise of guidelinecentral.com

11. Unnecessary infrastructure, large quantities of brand collateral, legal fees, and traditional advertising. Young Entrepreneurs don’t need a CRM when they don’t have any clients, or patents to protect ideas that haven’t been proven valuable yet. Adam Wagner of Go Media, Inc

12. Entrepreneurs copying best practices (whether it be marketing strategy, social media roadmaps, service providers, fundraising contacts) of other entrepreneurs who are not wired like them. Joe Abraham of Entrepreneurial DNA

13. The biggest money waster is poor decisions. Small businesses and entrepreneurs have to make good decisions the first time; they don’t have the cushion that larger firms do. Seena Sharp of sharpmarket.com

14. Small businesses owners often waste too much of their own time – and, time as we know is money – doing tasks they have no prior experience in. They should instead focus on their core business strengths, and hire trustworthy outside support for areas that fall way outside their comfort zone. Christina Rae, President of Buzz Creators

15.  By far the worst investment was buying or getting access to an email list we got ripped off and would highly recommend all small businesses to avoid the temptation of buying an email list no matter how good in “theory” it may be. It does not work at all! Derek Capo of NextStepChina.org

16. The #1 Biggest Money Waster for Small Businesses has to be Twitter and Facebook. Most people just don’t know how to do it effectively, they’ve heard the hype and believe it. The spend time and money chasing the social media dream only to realized that’s it’s a nightmare of wasted money and time. Bert Martinez of BertMartinez.com

17. The #1 biggest money waster for small businesses that I have observed has to do with human resources. The amount of time, money and effort that goes into hiring a person and training them is tremendous. Thus it is vitally important to put in the time and effort to make sure the company hires the right person with the right skills and right attitude for the position they are trying to fill. Rich of empireofhope.com

18. The biggest thing I see small businesses and entrepreneurs spend money on are expensive marketing materials and complicated websites. Creating complicated brochures, logos and websites before the message has evolved sufficiently is a waste of time and money. Bonnie Harris of WaxMarketing.com

19. The most wasteful start-up costs can be attributed to premature scaling – rather, when start-ups try to grow too big, too quickly and develop tunnel vision, focusing on one aspect of their business above the rest. Right now, those premature scaling temptations have to do with establishing the “presence” of the company: start-ups with cash tend to want to spend it on swanky office space, for instance, replete with brand new computers and gadgets. Alex Wall

20. I think a lot of new entrepreneurs think they should pay someone to help with SEO. However, providing good solid products/services, good content on your blog and working the free social media outlets in a professional way will get you ranked on the search engines as well. That money could be put to better use. Mrs. Shilonda Downing of Virtual Work Team LLC

21. Money spent on outsourced services. The big ones are legal, banking, and consulting fees–they can be sneaky expensive and (especially early on) completely avoidable with some hustle on your part. Ben Wagner, CEO of LifeKraze

22. I think the biggest money waster is renting office space if you can work from home in the early stages. Technology allows more virtual workplaces to function efficiently. Nick Robinson of Social Media HQ

23. Without a doubt, hands down the biggest money waster is ineffective marketing because the majority of start-ups, small business owners or entrepreneurs are clueless about marketing. These entrepreneurs and small business owners are taken advantage of by marketing firms who believe marketing is glossy brochures, intricate logos, fancy websites while marketing is all about attracting attention and building relationships. Leanne Hoagland-Smith Author of Be the Red Jacket

24. Office space/Furniture. Be scrappy. Find a creative space you can think and execute. You are not a lawyer that charges hundreds an hour to show off your space with luxurious furniture. Go on Craigslist and buy the nice furniture of companies that have went down the drain for wasting their money on nice fixtures and locate companies that have downsized there teams and have extra office space to donate. Eli Natan of Promoting Group

25. Hard cost things such as office space, phone systems, etc. when they don’t have any clients yet. Also, since time is money, putting much too much focus on social media, believing that “friends” and “followers” are the same as buyers. Michael J. Van Osch of thinktankmen.com

26. I’d say entrepreneurs and small businesses overspend on is branding/logos/marketing. While this is important for any business to succeed, the initial focus needs to be on putting together a quality product. Attracting attention to a so-so product will never work. Andrew Schrage of MoneyCrashers.com

27. I think the biggest waste of money is Press Releases. There is too many other ways to get your message out these days then to spend hundreds on PRWeb, MarketWire and the likes of.. Filomena Laforgia of Filanthropists.com

28. By far— marketing dollars-most new entrepreneurs are haphazard in their approach especially with the litany of social media available today. They waste big money and don’t achieve desired results. Ted Jenkin of yoursmartmoneymoves.com

29. Advertising that has no chance of bringing in a return that pays for itself. There are a lot of fun ways to spend advertising dollars, but very few that will actually pay for themselves with customers. Entrepreneurs need to be realistic with response rates, purchase rates, average order, and margin per order, to gain an understanding of the viability of a potential advertising campaign. Paul Shrater of Minimus.biz

30. Traditional advertising. Today’s consumer has been trained since birth to ignore ads. If the ads are in magazines, our eyeballs dance around them and go straight for the editorial content. If its on the radio – we just want to listen to music so we change the station. Anthony V. Codispoti of ActivistEyewear.com

31. The biggest thing early stage entrepreneurs waste their money on is professional branding. Forget getting the fancy logo and stationary done when you first start – it may change and evolve as you figure out what your business really is. Instead just get someone off elance or 99designs to do it for a couple of hundred dollars and move forward. Work on the business itself, not the fancy branding. Lea Richards of pigofthemonth.com

32. Your website is going to make you zilch! As a newbie entrepreneur you have no name yet (typically) and spending thousands on a fancy branded brochure isn’t the best way to invest in your online presence. Mini sites, blogs, sales/squeeze pages, social media branding, and video are where your cash gets real ROI, now! Mys Palme of AboveTheMoldcopywriting.com

33. I think one of the biggest money wasters is Google Adwords, which can drain the wallet considerably and really get out of hand if you don’t know how to navigate these waters properly. It’s happened to me, with little or no ROI. What I have found to be more effective instead is blogging! Melanie Heywood of SmartySaver.com

34. The No. 1 source of waste in the workplace is inefficient use of personnel. New businesses need to take a hands-on approach with their employees and train them to use their time efficiently, so that their efforts provide an effective return on investment. If employees in a new business are spending a lot of time chatting or checking Facebook, or re-folding the same sweater every few minutes, they are receiving money for nothing, and that is only going to bring the business down. Mark McLaughlin of Results Marketing

35. The biggest areas I see young entrepreneurs spend foolishly on are technology and marketing; sometimes it makes sense to outsource, but sometimes it does not. Since technology changes so fast, I’ve seen small business owners buy too much, too soon and build websites for foolish amounts of money. Unless it’s an e-commerce company…websites are a commodity and won’t break you. Tom Gimbel of thelasallenetwork.com

36. We believe that the biggest waste of money for small business/entrepreneurs is hiring employees during their early stages. Instead of hiring employees, unpaid interns are a free source of help so that businesses/entrepreneurs can begin to learn the process of delegation and refocus their time and energy into the most productive and lucrative aspects of their business. Erica Sperber of SuperInterns.com

37. Early stage entrepreneurs sometimes get too highly focused on the “image” they’d like to present rather than on things that drive revenues and profits. The focus on high-end office space, automobiles, and expensive AV equipment often comes prematurely when the business can least afford to do it. Bret Duston of Vectra Bank Colorado

38. Biggest money waster for small business is unequivocally the selection of poor talent. Many entrepreneurs are on tight budgets and hire talent based upon cost. My biggest mistakes usually involved picking people based upon budgets. Lesson learned: pick the absolute best talent you can find and let them work their magic. Figure out how to pay for that talent in any way possible. They quickly return back to you/the company several times their cost. Mike Thomas, Chairman and CEO of Mommy’s Medicine Cabinet

39. When launching a small business, one of the biggest wastes of money is to purchase databases and complex software. You can’t fully appreciate your needs until you’re in the thick of it. Sometimes an Excel spreadsheet will suffice until you nail down your exact software needs. You can always buy it later. Ashley Judge Founder AlwaysFits.com

40. Many small businesses secure office space unnecessarily which result in a lot of wasted money. Unless you are meeting clients in your office, use software like basecamphq.com to work remotely with your team. Additionally, I suggest purchasing a virtual office which will provide you with posh address in the city of your choice to add credibility to your company. Anthony Saladino, of Kitchen Cabinet Kings

Where do you think small business waste the most money in the early days?

About the Author: Jared O'Toole

Co-founder and editor of Under30Media. You can send an email to Jared(at)Under30CEO.com. Follow him on Google+ or @JaredOToole

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  • Dar’shun Kendrick

    No.9 is why lawyers are rich: Because someone tells them to do “legal work” WITHOUT a lawyer. Smh…agree with most of everything else except that one. Shouldn’t be included on the list. Unless you are a one (1) person operation, GET A LAWYER TO DO YOUR INCORPORATION WORK! We charge $100 on Tuesdays and it saves lots of headaches! (www.kendricklaw.net)

  • http://twitter.com/JannMirchandani Jann Mirchandani

    Lots of good comments here but I need to disagree with #3. There are a lot of ways to do your first website wrong and lose business in the process. 
    Working with a professional will allow you to avoid common mistakes and pitfalls often associated with first generation websites. The mistake would be in not carefully considering your goals and establishing some criteria for measuring outcomes. (WestchesterMarketingCafe.com)

  • http://www.hoodwebmanagement.com Kane at Hood Web Management

    Hi Jann – as a website marketer myself I’d also disagree with #3 – an *effective* website is key to many small businesses. But, that said, there are sadly a lot of people in our industry selling snake oil, and it’s easy for someone who doesn’t know the difference to pay a lot of money to someone who’s giving them overpriced junk in return. Agreed that establishing goals and metrics for performance are key to success with new websites.

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  • http://www.naivethinking.com Matt De Leon

    Funny that #36 is probably one of the most critical: hiring people you don’t really need. Humans cost more money than anything else, yet it seems as though every entrepreneur’s dream is to hire lots of people. Our tendency is to grow quicker than we should. We’d be much better of hiring slowly and learning how to manage employees while getting the most out of them. DON’T WASTE MONEY on people you don’t absolutely, hands-down, 100% need!

  • http://twitter.com/BoiseComputing Boise Computing

    This is a great list.  We are about to launch a business and just reading through this list I am seeing we are about 99% on the right path for every single one.  We are doing a lot of everything ourselves, such as website, SEO, marketing, etc. since we already have the talent to do so.  Maybe we are lucky…

    So very encouraging and insightful.  Thanks!
    http://boisecomputing.com

  • Anonymous

    Hi,This my help.
    Offline Business Marketing Pack-Bob Barton
    Please check this site out !!!!

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  • http://www.facebook.com/AqiL.PaShA Aqeel Pasha

    If you really want to help small business to compete with big corporations they must teach small business, how to build up their business credit profiles. This is the KEY to helping any business getting funded. Here.

  • http://twitter.com/dsmy David Y

    I disagree with #3 myself, as a person working in design and development, an effective website is a big key in attracting and growing business. 

    Sadly our field is littered with people who do unfortunately take advantage of the lack of knowledge  of small business owners and give a bad name to the rest of us. However I always strongly suggest that before starting with any designer, do your research, take a look at what you want to accomplish and find a designer that is willing to help you get the most out of your site.

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  • http://cruzhouse.blogspot.com Louis

    I think most small business owners waste their money on buying the highest quality of something that they can easily get cheaper if they simply made it themselves. 

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  • Jon Dale

    I thought I’d answer with where we’ve overspent or wasted money in our early days. We’re 2 years in to a franchising journey, needing scale – more business coaches (yes, I know, being business coaches doesn’t necessarily mean we get it right all the time)  and more clients for them.
    We spent too much money on legals fees; developing our franchise docs (for America, too); hired too many people, paid ourselves a salary instead of earning our own coaching revenue; bought too many shiny toys; spent too much on advertising; nearly hired a PR; rented a nice office. Crap, we did most of them!
    Thinking about our customers, the overspends seem fairly well spread across the categories. 
    Mind you, I’ve noticed that people’s attitude to spending has changed in the last year or two…….we’re more careful and have slashed our costs to where they should be (less than revenue!) and most of our customers have done the same.

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  • http://www.blockbeta.com Robbin Block

    There are many great points here, but, and that’s a big BUT. For many, the need for and the results of marketing activities, building building websites, renting space and hiring talent depend on so many variables — strategic things like, business model, target audience, competition, positioning, etc. So the first move for any entrepreneur is to educate themselves about business, especially if they don’t have any experience (and I’m not talking about subject expertise, i.e., you could be the greatest photographer, but you probably don’t know much about business — it’s a discipline unto itself). The second move is to write down your ideas for a business. Third, seek out advice from people who have experience, either in your field or check out your local SCORE.org office.

    Don’t spend any money until you plan out how you’re going to make money.

  • Chris Healy

    Can I turn this on its head and offer this suggestion: the best way to save money is to look at every dollar as one coming out of your pocket. Do as much as you can yourself, leverage outsourcing marketplaces for specific skills you don’t have, and resist spending on any hardware. With your own laptop, a cellphone, and a rented desk at a business centre, you can have the building blocks for a professional-looking operation in a day. Add in a virtual PBX, a nice WordPress template, Google Apps for email and collaboration, and a business card from Moo.com or another online printer, and you’ve spent $700 in your first month.
    Small businesses should be continually testing their assumptions about their offering, their target market, pricing, and promotion. To set anything in stone until you have concrete data that shows a path to a viable business just leads to wasted time and money. Stay lean as long as possible, and spend only when there is a strong possibility of a positive return. There has never been a better time to be an entrepreneur, but regardless of how much money you have to spend, use it wisely. (tinybriefcase.com)

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  • Anonymous

    There seems to be several warnings about marketing, especially not having something measurable in place. When it comes to online marketing in particular I think you definitely need to be reluctant if you’re being offered something that you can’t measure. I know social media engagement is tough to track, but clicks, landing page conversation rates, email marketing conversions, etc. are all measurable if you have the right tools.

    We recently wrote a piece to help businesses choose
    an online marketing team. (http://www.kayakcreative.ca/blog/bid/105908/4-Questions-To-Ask-Before-Choosing-an-Online-Marketing-Team)

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  • http://www.futurebooks.com.sg/ Futurebooks

    Spending money building cost-centres which don’t relate to revenue generation. 

    Another is spending money trade marking a brand no one cares about. Unless the brand has become valuable, trade marking it just playing up to investors. 

  • http://www.futurebooks.com.sg/ Futurebooks

    Spending money building cost-centres which don’t relate to revenue generation. 

    Another is spending money trade marking a brand no one cares about. Unless the brand has become valuable, trade marking it just playing up to investors. 

  • http://www.futurebooks.com.sg/ Futurebooks

    Many believe in the adage ‘Fake it before you make it’. There is no substitute for a top looking product. Just don’t pay top price.

  • http://www.futurebooks.com.sg/ Futurebooks

    Many believe in the adage ‘Fake it before you make it’. There is no substitute for a top looking product. Just don’t pay top price.

  • http://www.buraq-technologies.com/ ambreen11

    I think the biggest money waster is poor decisions. Small businesses and
    entrepreneurs have to make good decisions the first time; they don’t
    have the cushion that larger firms do.Thanks

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  • http://www.facebook.com/adam.treister Adam Treister

    This article needs to be summarized and vetted much more clearly. I’m disappointed by under30CEO’s editor on this one.

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  • SomeOne who has Benn There

    As a small business owner and a working stff I have found people do not need to cost you the most money but can,…. and can also make you the most profit. so people can make you or break you. be wise and treat your workers fairly and they will make you successful