Start-ups are doing all they can to make their budgets go as far as possible. Every penny counts. But the approach to spending varies widely and there are 2 common mistakes start-ups' founders should try to avoid at the budgeting stage: Spending too little or Spending too much. That doesn't sound very intuitive, right? Let me explain.
Spending too little
Not spending enough can be costly. Some founders have the tendency to think they can build everything themself or cheaply. And yes, there are many ways to "save" in the early stages and many tools are enabling us to do more & more. However, getting cost-efficiency whilst achieving sufficient quality & effectiveness can be tricky.
Too often I see founders having spent time & money doing things "on the cheap" only to realise that the outputs aren't professional enough, creative enough or simply impactful enough. They are forced to find expensive fixes or, worse, to go back to the drawing board altogether. Spending more they would have if they chose the professional route in the first place.
Now, I'm not here suggesting that founders should shy away from doing things themselves or cheaply. But I do think they need to be honest with themselves about their core expertise & stick with those. For the other parts, they need to consider the level of guidance they're able to provide. If they can direct quite closely, low-cost freelance support might be a good solution. But if the topic or task is far from their comfort zone and/or they don't have the bandwidth to oversee, they should consider a more established set up - be it professional services or an agency. It might be more expensive, but actually cheaper in the long run.
Spending too much
Burst & Bust. On the opposite side of the spectrum are founders who set everything up for a big launch success and have nothing left to sustain activities post-launch. And whilst I'm not saying it can't work, typically, a new business builds success over time. Step by step; season by season. Supported by a continuous stream of budget.
So rather than having a budget plan that decreases after launch or is expected to be refilled by the revenues generated after the first couple of months, the smart approach is to build the budget up gradually, over 6-12 months period.
This enables you to test and optimise (channels, messages, creative, etc.) before you start putting more series money behind media.
In conclusion: When it comes to spending on marketing, finding the right balance is crucial. While cutting costs can seem like a smart move initially, it often leads to subpar outcomes that require costly fixes later on. It's important for founders to recognize their core strengths and delegate tasks outside their expertise to professionals when needed.
On the flip side, overspending on a grand launch without sustainable post-launch plans can lead to financial instability. A gradual budget buildup over time allows for testing and optimization before committing significant resources.
Striking a balance between cost-effectiveness and sustainable growth is key to long-term success in business.
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