2015-12-28 09:43:00Business PlanningEnglishIf you're building a start up, the question of how to spend your money is ever-present. Learn how one entrepreneur spent his first $50,000...https://quickbooks.intuit.com/r/us_qrc/uploads/2015/12/2015_12_10-small-am-starting-up-the-importance-of-your-first-50_000.jpghttps://quickbooks.intuit.com/r/business-planning/starting-importance-first-50000/Starting Up: The Importance Of Your First $50,000

Starting Up: The Importance Of Your First $50,000

3 min read

While $50,000 may not sound like a lot in this age of unicorns (i.e. startups that receive a valuation at or over $1 billion) that receive huge funding rounds, I was thrilled to get this amount for my first business. It was a significant amount, and I had great plans for the money. Previous funding amounts were a few thousand, but nothing could top a figure like this for me at the time.

That figure meant that I could get up and running so much faster. But if I rushed to do all that I wanted, however, I knew that the money would evaporate. I had to leverage it correctly. Here’s my advice, based on my own experience, on what you should do with your first $50,000.

Don’t Overspend on Developers

Your development costs for any technology platform that runs your business can quickly drain that $50,000. Instead, I opted to outsource development and found some incredible developers from around the world that were eager to get involved in building something from the ground up. Their rates were a fraction of the cost of hiring a developer as an employee, which meant that I got an excellent technology platform for my business at a considerable value.

Avoid Overhead Costs (Like Office Space)

Having an office in one of those tech parks or high-rises makes it feel like my business has arrived, but I knew it was still waiting in the wings. I opted for running the business from my house, which actually enabled me to have more tax deductions and keep any money saved for more important costs.

Minimize Advertising Costs

I quickly learned that online marketing didn’t have to cost a lot of money. There was no reason to burn money on traditional advertising like print ads or television spots. Thanks to social media, news about my company and the solutions I provided was being shared through various online channels. Online marketing required a bigger investment in terms of my time, rather than eating into that $50,000.

Don’t Pay Yourself

Rather than using the funding I had received to pay myself, I instead used previously saved up money to support myself while I worked on this startup. I also continued working a “regular” job for a paycheck. If I had used these funds to pay myself, it would be gone in under a year, leaving me with none of it to spend on anything else.

Focus on Traction-Building Activities

Marketing is a wise way to use some of the money, but the activities you should focus on most are those that generate traffic and drive long time acquisition success. I learned early on that internet marketing tactics like content generation, SEO, blogs and social media are worth the time they take, and I maximized my return on investment when I used them correctly. I was able to do most of these online marketing tactics myself, which helped make the $50,000 last longer.

Onboard Talent Only When Absolutely Necessary

Like an office space, a team is great to have when you reach the right level, but it’s not needed at the start. I selected talent very carefully and, even then, only worked with them on a per-project basis. If there were freelancers that had long-term potential, I made sure to continue giving them work so they would stay around until I could grow the business far enough to bring them on as full-time staff.

Invest in Business-Building Tools

As I developed the business and became familiar with the day-to-day activities, I began to understand where and how this money could make a critical difference. For example, bandwidth, scalable servers, software and other tools are the engines of growth behind any startup, and each needs regular maintenance.

Spending a significant amount of money on these business-building tools helps to prepare for the influx of traffic and eventual customers. If any of these areas are not working, I’d lose the traffic—and leads that I was working so hard to acquire—with my marketing investment.

Even with conservative planning and prudent spending, all of the activities involved in growing a startup will still take way longer than you think due to unexpected hurdles along the way. Looking back, I realized there were further ways I could have made the money last longer.

That said, it’s not just about that first $50,000. While I was carefully spending those funds, I was also focused on creating the next $50,000 organically. The goal was to continually build out a viable business to attract further funding. Your short-term business goals should be thinking about ways to use your funds to create value that helps you exploit as many long-term opportunities as possible, rather than just covering costs in the present.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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