One of the hardest lessons for most new business owners to learn is the difference between being cheap and being frugal. You can understand why. When a business owner finally starts making some money from the hard work in their business, they want to reap some of the benefits. They want to be paid for the hard work and sacrifice they have put in to that point.
This usually happens in the early stages of a business - within the first year or two. But, the big mistake that most young entrepreneurs or new business owners make is becoming cheap and not spending on the things that will really take their business to its next level. At this stage in a business, it is not the time to stop investing - it is the most important time to invest. A business owner in this stage must be frugal in that they don't waste money, but they spend it on the things that will give a large return in the future.
The other issue that must be watched is short term thinking. Many new or young entrepreneurs are only focused on the next month or two at this stage in their business and are not being strategic about what is needed to 2x, 5x, or 10x their business over the next year or two. You must remember to delay gratification at this stage and invest back into your company if you are in this position.
This one mistake can delay or ruin the growth of a business.
For example, if you are having some success and generating positive cashflow, but you are still doing all of the roles in your company, ie. trying to sell every client, run operations, manage cash, etc., you are going to do a bad job. You will be a jack of all trades and a master of none and your business will flounder. Instead, invest in a great salesperson or contractor and don't worry about paying them commission for their work - it will pay off 10 fold down the line. Or maybe you need some help with administration or getting all your processes and systems dialed in and documented (a critical key to success for a business), then bring in someone, whether a consultant for a period or an operations employee to help gets things dialed in. These are investments that will pay off, allow you to scale, and help you to make massive amounts of money. Don't be cheap and delay these investments.
Lastly, this is also the stage where you should be on the hunt for A-players to form your rockstar team...and almost inevitably one will come along during this time that will cost more than you think you can afford. This will stretch you and stress you, but my advice is get them on-board. To find true A-players that will be as excited and devoted to your business as you, is difficult. They are basically diamonds in the the rough. Figure out a way to get them on-board. If you can't pay the salary, work with them to find a way to compensate them less in the beginning and more over time or give them something they don't have currently (maybe a more flexible schedule or more vacation). Do whatever you can to find a way to get them involved because they will make a huge difference in the future of your business.
Always remember, that there is a difference between being cheap and being frugal. Don't be cheap. Invest in your business and your future, and the rewards will be exponentially more than the little bit your are trying to hold onto in the early stages of your business!
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