Common practices that may be hurting startups

Passion and a great product are, obviously, two key things venture capital firms may look for when fielding potential investment prospects, but another aspect may be how well a young business manages its finances. The way startups spend their money says many things about them as a company.

While tightening the belt on items such as office supplies (using a cloud database) and offering products for a reasonable and attractive price will help startups stay in the black, it behooves entrepreneurs to avoid skimping out on some of these necessary expenses.

Many startups with an office space or a storefront may opt for the most affordable property to save on rent, but according to the New York Times, this could be a mistake. The workspace a company inhabits is essential for impressing potential clients or investors who may come in for meetings, negotiations or to see what the business has to offer.

And while the physical location may be a necessary expense, personnel turnover can be costly as well. The Times recommends that if startups intend to maintain a successful growth plan, should they refrain from hiring from their personal pool of friends and instead search for competent candidates to whom they have less emotional attachment. As a reference point, entrepreneurs should use the adage, "if you can't fire 'em, don't hire 'em."

Furthermore, many startups may attempt to save expenses while they're young by seeking the consultation of cheaper lawyers and accountants, but the Times recommends against this practice. In fact, the news source claims "there is nothing more expensive than a cheap lawyer or accountant." Contracting a lawyer or accountant that comes with a heavy price tag may seem excessive, but this is an expense that should not be dismissed, as these professionals are experts in extremely complicated areas of business.

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