Many entrepreneurs believe that bootstrapping is the best way to start a company, giving you the freedom you wouldn’t have if you had to report every expense to a venture capitalist or angel investor (though that’s not to say those parties aren’t concerned with costs either).
However, some expenses are important -- even when they’re costly. Here are eight in particular that are actually worth the investment.
1. Free swag
OK, I’m sure this isn’t the first thing you were expecting to see on this list. But the simple truth is that giving away free company T-shirts helped me generate more than $500,000 in revenue, as I was able to use the T-shirts as a way to strike up business conversations, get noticed by large companies and grow my brand recognition.
It’s hard to come up with ways to share your company that people will pay attention to. This is where free swag can be so valuable. So spend a little cash and you’ll reap amazing rewards.
2. Powerful data analytics software
Many of you know that I’m a huge proponent of testing. You can’t improve what you don’t measure, and you can’t measure unless you test. As a result, I strongly recommend spending money on robust data analytics software from the start.
Analytics helps you understand which things that “should work” simply don’t. As a data-driven business owner, you’ll want to analyze numbers from dozens of different sources to create an informed viewpoint. Powerful data analytics software makes this possible.
3. Legal advice
Lawyers aren’t cheap, but for a startup, good legal advice is essential. Find a lawyer who specializes in your type of business and pay for the advice you need to keep everything above board. In 2011, statistics gathered by VentureBeat showed that new Silicon Valley startups spent an average of around $80,000 on legal advice. It’s likely even more now.
Having good legal advice may be expensive now, but making a legal mistake can easily cost you much more in court fees. It could even bankrupt your company.
4. Financial advice
Unless you’re going into the financial planning business, your expertise probably lies elsewhere. As a result, it’s important to pay what you need to secure good financial advice.
Having an accountant or tax attorney set up your books and help you understand what needs to be tracked will help you secure future funding and save you untold trouble and headaches down the road. Don’t underestimate the importance of a long-term financial plan on your company’s success.
5. An accountant
I won’t bore you with details, but suffice it to say that Uncle Sam wants his portion of the pie. It can be very hard to set aside the necessary money for your taxes, and even more confusing to identify all of your valid tax deductions. Don’t throw money down the drain, and don’t anger the IRS -- spend some cash on a good accountant.
Most accountants will be able to meet with you by the hour to give you advice on deductions and documentation. Then they’ll charge a fee each year to complete and file your taxes. It’s that simple, and it’s worth it.
6. Market research
A survey of more than 100 entrepreneurs of failed startups found that 42 percent attributed their failure to a lack of need for their product. Don’t waste time assuming you know who your target is and what they need -- spend the money to really find out.
Market research can be time-consuming and expensive, but rolling out a product or service to an untested market is even more so.
7. Customer service
The value of good customer satisfaction can’t be overemphasized. A survey reported in Marketing Metrics of almost 200 marketing managers revealed that 71 percent found customer satisfaction to be a key metric in managing their businesses.
Customer satisfaction is a leading indicator of customer loyalty, reduces customer churn rates, increases the lifetime value of a purchaser and improves word of mouth as a key differentiator of your company. Spend the money to get good customer service -- it’ll more than pay for itself in the long-run.
8. Technical support
As a founder, tech may not be your thing. Even if it is, you may still want to outsource some (or all) of your in-house technological needs. Keep what you’re good at and passionate about, but outsource the parts of your technology that you need to run on autopilot so that you can tackle bigger priorities.
The hours you’d spend doing server maintenance and building your own website are better invested in your core competencies. Having your technology run smoothly is essential to business success. As a result, it’s worth the money to pay for great technical support.
Having a startup is an exciting adventure, and many founders find themselves bootstrapping the early part of their company’s growth. There’s nothing wrong with that -- just make sure you’re willing to spend money where it matters. The eight expenses above are definitely worth the investment.
What costly expense is essential to your startup? Share your experiences by leaving a comment below.