December 2, 2014 Forecasting en_US Startup founders and small business owners are always on the lookout for ways to save cash, but it's never a good idea to cut corners in these areas. Startup Finances: Where NOT To Cut Corners

Startup Finances: Where NOT To Cut Corners

By April Maguire December 2, 2014

It’s no secret that most startups are working on tight budgets. And while the slow economic recovery makes pinching pennies more important than ever, some of the most popular money-saving strategies could end up costing your business a great deal in the long run.

Below are some vital areas of your startup budget where cutting corners is never a smart idea.


It doesn’t matter how great your offerings are if potential customers don’t know they exist. A successful business of any kind requires a strong marketing plan that identifies its target markets and outlines strategies for reaching them. And while startup founders may be tempted to slash their marketing budgets to save cash, the truth is that inadequate marketing will actually stunt your business’ growth.

Instead of cutting marketing costs during those early, lean days, startups should aim to increase communication with their clients. Seeking out new customers and encouraging existing ones to buy from you again will translate to more revenue in the long run.

If funds are tight, consider focusing on lower-cost options, such as email marketing, web content and social media. However, whenever possible, businesses should aim to hire experienced professionals to handle their online marketing. According to a recent report, 66% of small businesses plan to spend more on digital marketing in the coming years, and you don’t want to be left behind.


As a small business owner, you may be tempted to save money by skipping a few IT upgrades. However, the fact is that cutting your tech budget could result in decreased income for your business.

With most companies relying on the web to find and reach customers these days, a slow internet speed can seriously hinder productivity. Additionally, cutting corners on your tech budget could lead to security breaches that put customer information at risk, which can cost you money and customers in the long run.

Startups should also avoid skimping on the quality of their websites. While you don’t need an elaborately designed, 20-page site, it’s a good idea to have one that looks professional and is populated with original, high-quality content and visuals. For many new businesses, websites are the first things potential customers see, and it’s always important to make a strong first impression.


Small business owners are constantly trying to ascertain what expenses are necessary and which ones can be cut from the budget. One area where you definitely don’t want to cut corners is business insurance.

While no one wants to think about an accident or disaster hitting their business, it’s essential that small business owners invest in business insurance. By paying a monthly premium, startup founders can protect their companies in the event of a robbery, fire or even lawsuits. Additionally, insurance covers product and customer liabilities, as well as the actions of your employees.

Invest in insurance to protect both your business and the people who keep it running.


Want to cut the budget for your startup? While it may seem counterintuitive, paying for a licensed bookkeeper to handle your finances can actually help you save cash.

Along with correcting potentially costly errors in your financial dealings, an accountant worth his or her salt can help you keep more of your income in the long run by ensuring that you take advantage of all possible tax breaks. Additionally, a bookkeeper can manage your budgeting and employee salaries, freeing you up to focus on what matters most: growing your business.

Hire an accountant now, and save the CFO for when your startup begins to mature.

Product Quality

One area where it’s never okay to cut corners is product quality. Although you may be tempted to skimp on quality in the early days when profit margins are lean, doing this can forever damage your reputation with customers.

These days, many startups rely on online reviews from sites like Yelp and Google to draw in new customers. And while cutting corners may allow you to produce more items at a lower price, the short-term gain in profits won’t be worth the long-term injury to your brand.

Additionally, producing an inferior product can hurt your chances of landing potential investors down the line. Both customers and lenders want to know that your product is built to last, and cutting quality now could cost you everything in the long term.

On a similar note, startups should avoid cutting corners in their customer service. Even if a client is unhappy with a product or service, responding to concerns in a timely and respectful manner can go a long way toward re-establishing goodwill.

Don’t Cut Corners on Your Startup

As an entrepreneur, you probably know that financial oversights are one of the most common reasons why startups fail. Fortunately, today’s small business owners can learn from their predecessors’ mistakes when it comes to money management. By avoiding the cost-saving strategies highlighted above and focusing instead on customer service and product quality, you can boost your startup’s chances at financial success.

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A graduate of the Master of Professional Writing program at USC, April Maguire has served as a writer, editor and content manager. Currently, she works as a full-time freelance writer based in Los Angeles. Read more