REUTERS

(REUTERS)

11 Major Spending Mistakes Many Entrepreneurs Make

By Features AllBusiness.com

When first starting out, it often seems that simple things like monthly subscriptions will only help your business. But after the first few months—then years—the small costs can really add up. That’s why we asked 11 entrepreneurs from Young Entrepreneur Council (YEC) the following question.

Continue Reading Below

Q. What is one major spending mistake entrepreneurs make unintentionally?

1. Paying Too Much in Merchant Account Fees

One critical component in your business is how you collect money from your customers. A large piece of that for many companies is credit card processing. As someone in the industry, I know how costly it can be to make a knee-jerk decision to set up what is quick and has a simple pricing model, rather than finding a reputable rep to save you on fees. – Darrah BrusteinNetwork Under 40 / Finance Whiz Kids 

2. Hiring the Wrong Coach

Business coaching is a huge business and it’s easy to get swept up into making a five-figure investment without considering what your business needs most. Be willing to take your time, really research a coach’s reputation and get the right fit. – Kelly AzevedoShe’s Got Systems

Continue Reading Below

3. Paying for Services That Charge Monthly

Services that charge monthly can become a financial drain. The prices don’t seem high but when you multiply everything by 12 months, these benign costs can really add up. A lot of early-stage entrepreneurs are not tight enough on costs. Imagine if you had found enough savings to hire another employee. I’d much rather have another great employee than a bunch of rarely used services. – Luke SkurmanNiche.com

4. Spending Too Much on Rent

Getting a cool office at the beginning might seem like a great idea. You can afford it this month, but can you really afford it for the next year or two? I have seen people who have glamorized the “startup lifestyle” and believe cool offices are a necessary part of it. That couldn’t be further from the truth. You can change the world straight from your garage. – Kenny NguyenBig Fish Presentations

5. Paying Unexpected Legal Expenses

What may seem like a simple legal question can result in a 20-page memo and a $3,000 invoice. Some attorneys are willing to offer project rates or a cost cap on a project to help you budget your legal expenses. It is worth asking your attorney if they would consider a project rate or cost cap fee arrangement. After all, if you don’t ask, you don’t get. – Doug BendBend Law Group, PC

6. Hiring a PR Firm Right Away

All too often early-stage entrepreneurs are enticed by the glamour and recognition of articles, awards and credentials, and hire a pricey PR firm in excitement. However, it is critical to resist that urge and let your work be your calling card. If the energy and passion you put into your work shows then the awards and recognition will follow organically. – Kim KaupeZinePak

7. Not Keeping Track of Small Subscription Fees

A SaaS CRM is $40 a month, hosting is $50 a month, social media management might be $20. Keep track of these in a spreadsheet so you know when your recurring outlay is getting too high and what you can consolidate. If you don’t, you’ll quickly find yourself spending several hundred a month for a package of services, half of which you might not even really be using any longer. – Brian FrittonPatch of Land

8. Overspending

Know your budget numbers day in and day out and don’t spend on things you absolutely don’t need. Did you check the shipping rates with multiple carriers? Are you making more than you’re spending? Numbers don’t lie. Get it together from the beginning and don’t sway from it. Hold your ground and make tough decisions if you have to. – Mark SamuelFitmark

9. Having Liberal Hiring Policies

When you’re first starting out, avoid unnecessarily inflating your employee head count. While it may be nice to have an office manager, an administrative assistant and a dedicated HR person, most of those tasks can either be outsourced or handled as shared responsibilities. Limit your overhead and operate lean because profitable businesses are ones with true staying power. – Firas KittanehAmerisleep

10. Signing Endorsement Contracts

If a celebrity or expert takes an interest in your business, its tempting to sign them to endorse your product. An endorsement alone is not going to sell your business—you still have to build awareness and market the product. Endorsement deals are often seen as a silver bullet when, in reality, they cost a lot and offer little return if you don’t support it with marketing and operations. – Angela HarlessAcrobatAnt

11. Overspending on Cellphones

Cellphones are expensive, but your employees need them to interact with customers. Make sure you get a corporate wireless plan. If you don’t qualify for one, then go with a less expensive prepaid plan. – Lane CampbellSyntress SCDT

The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

More from AllBusiness.com:

...