Error Report: Spending Slips That Cause Businesses to Fail

Eeman Bulotano
September 13, 2021

Early overspending is too easy it’s a usual mistake. A little discipline can really go a long way in this long haul.

whtonNo mistake can sink a new business faster than undisciplined or unfocused budgeting. This is sometimes referred to as overspending, but what it really means is spending on the wrong things at the wrong time. Money well spent can lead to profits quickly. Haphazard spending, on the other hand, will only deplete you of the capital that you so desperately need to stay afloat. This is a mistake often made in several different ways.

Error #1: Too Much Early Debts

This is probably the quickest way we get in a tight spot. Business credits, just as funds from friends or family, can assist you with getting your business going. In any case, you should be exceptionally cautious with regards to the amount you acquire and under what terms. In one of my early ventures, a lot of people are telling me to just “borrow” money to kickstart the ideas I have. But back then, those were just ideas and it might be not the best move to put a financial value on just ideas. Since… you know, we can’t quantify ideas. What we can quantify are business models, plans, and projections. For sure, passion’s very important, but without proper planning, we might end up hurting more than we can help.

Having too much debts can quickly spiral into true chaos. Let profits fund your business instead of debts. At the end of the day, this also proves that the business is actually a business. Otherwise, we might just be spending money. It also goes without saying that streamlined expenses from the start of the battle goes a long way eventually.

Let’s not forget that revenue isn’t just about profit. It’s also about savings. The more we save, the more we earn.


Error #2: Over-Advertising without Profit-Planning.

Advertising is another area where it’s all too easy to overextend yourself. This can be a double-edged sword since you can tell yourself that you are building brand awareness and attracting new customers, leads, or website traffic. The problem is, much advertising tends to be wasted money that brings insufficient returns. We’ve seen a lot of companies do this. Spending tons of budget on social media ads while neglecting the development of internal processes and actual product or service development. At an early stage. Wew. There’s nothing wrong about hyping the idea of your brand but… we have to make sure we actually do lift before we flex

 “…we have to make sure we actually do lift before we go flexing”

Before doing any advertising, make sure to set specific goals. Many types of online advertising are better suited for getting leads than for directly selling a product or service. This means you need to have a sufficient budget to think long-term, since it may be at least a few months before you start seeing returns on your advertising.

Like, in our case, we didn’t really spend much on social ads during the first year of our company as we didn’t see the necessity of having followers online. We focused on advertising and organic search efforts to make sure that those who actually need us are the ones who are talking to us.

Less is always more.


Error #3: Getting Expensive Products and Services You Don’t Know How to Maximize Yet

People who are anxious to get their businesses up and running don’t always do enough comparison shopping when choosing essential products and services. This isn’t to say that the cheapest solution is always best. However, there’s no reason to spend 25 percent more on something when you can get basically the same thing for a lot less.

Some companies overspend on more advanced and complicated software systems than they don’t really need at the time.  At the start, it might be better to be looking for ways to streamline our expenses. Since more or less you’re still learning how to optimize your operations, mistakes and errors more or less are expected, and having to be able to try things out and mix and match what fits without having to spend so much might help you get to where you’re going.


Key Point: Keep it Real

While some businesses are really really careful with their spending, the other extreme is the more common mistake. Balance your passion with the realities of where you’re spending your money. Every expense and investment should be carefully considered so that your capital doesn’t deplete before you actually generate profits.

Definitely, the dreams and passions of founders are the drivers of any venture. But every driver needs a good engine to go where they have to go, the actual business models and plans help them build a vehicle that balances what they need and what they can.

Luckily, more options and choices are now available for digital transformation. Check out how we can help you get affordable and accessible digital experiences to get you going. 👌

By: <a href="https://hooman.design/team/eeman" target="_blank">Eeman Bulotano</a>

By: Eeman Bulotano

Founder and Chief Digital Officer. Full Stack CX Design and Development. Digital Experience Professional. Business Development / Design. Branding. Beat Making.

Stories 📰

Just us discussing human stuff. Blogs, Videos, Infographics, anything human. From humans.

View Stories