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.