4 Tips for Entrepreneurs to Use Their Money Prudently

As an entrepreneur, you have a lot on your plate. You oversee everything – from product development and improvement, to hiring, finances, daily operations, client acquisition, interacting with investors, networking, and everything else that you can think of.

Your two most precious assets are funds and people. This post is addressed towards managing one of them smartly – money.

Here are 4 tips to help you, an entrepreneur, use your money judiciously:

1. Be Lean

From the outset, investing in a swanky office is not essential. In fact, you will notice that overheads like rent and electricity bills are the biggest contributors to your spending. So if you rarely invite clients over, don’t spend on an office. Instead, hold the meetings in a coworking space or at a coffee shop. Plus, you don’t need to invest in a Mercedes Benz if a Honda City is good enough. Owning a Benz is amazing. But think about whether the funds can be deployed for better use.

Another cardinal sin many entrepreneurs commit is bullish hiring. Salaries again account for a large chunk of your expenses. Instead of hiring right of the bat and aiming at growth, look at validating your idea first. Create a landing page with a mockup of your offering and a form which invites people to preregister for your product or service. Drive traffic through social media and Google ads. If your conversions are good, you know you have a feasible business model. If not, you can go back to the drawing board with your existing people and refine your model till it appeals to your target audience.

Summary: Keep your business lean. Invest in the right areas. Look for feedback from your audience. These tips will save your business a lot of money.

2. Research your tools

As your business grows, you will need tools for many activities – payroll management, product development, marketing (to an extent), and more. If you buy the first set of tools you find (maybe after reading about them in a newspaper), you might lose out on opportunities to save money and get access to some really cool stuff.

So conduct research. Speak to fellow entrepreneurs and ask them which tools they prefer. Read honest reviews online and understand what users say about the tools. Collect multiple opinions. Then weigh the pros and cons and decide which tool you would like to invest in.

Summary: To ensure that your money is being put to good use, conduct research well. Find and invest in tools which best fit your requirements.

3. Don’t pay for PR

The way people consume news today has changed. Rarely do we refer to mainstream media to make a purchasing decision. Instead, we look for authentic reviews from credible websites, influencers and our friends.

So stop spending on expensive PR. Instead, build relations with influencers i.e. people who can influence your target audience’s buying decisions. Also build relations with journalists. Social media is a terrific platform to connect with them and take things forward. Chart out an interesting story about your business, one that they will like to talk about.

Summary: Save money by building the right long term relations which offer better return on investment. They are also substantially cheaper than investing lakhs of rupees in paid PR which is forgotten within a few days.

4. Focus on profitability

Yes, Amazon took seven years to post their first quarterly profit. Flipkart and Snapdeal might turn profitable by 2020. They are going after market share at the expense of profitability. But for every Flipkart, there are thousands (if not lakhs) of businesses which are shutting shop because investors don’t want to keep pumping funds in them.

Think back to the time about why you wanted to become an entrepreneur. Did you want to do it because you could offer value, or because you wanted to be known as ‘India’s next Apple’? Look at your market. Have an honest conversation with your stakeholders. How long can you sustain losses while pursuing market share? There is no denying that you initially must focus on customer acquisition at the expense of profitability. But don’t try doing too many things at once. Take one step at a time. And focus on profitability so that you can retain good talent and keep your business functioning smoothly.

Summary: Ask yourself: Do I want to burn out as an entrepreneur because of investor stress or enjoy the beautiful journey?

More than achieving goals, entrepreneurship is about the journey. In fact, for an entrepreneur, no goal is ever enough. The killer instinct drives them to keep achieving more, to build something better. To manage it, they have to walk the tightrope when it comes to handling cash and people. Use the above tips to optimize resources and funds. Everything else will eventually find a way.

Vishal is the founder of Aryatra, a venture to help individuals improve their productivity and live more fulfilled lives. He also is a digital marketing consultant helping businesses generate revenue from their online presence.