Having lots of cash (after having none and working your butt off to raise it) can seem like the answer to all your worries. But if you’re reading this blog post, you’ll know that’s not the case. With each stage of building a B2B tech business comes new cash pressures, and getting a big chunk of investment makes you acutely aware of:
- Your responsibility to spend it well
- How expensive things really are
Working with tech founders, we see where money is most commonly and easily misspent.
Three areas we’re going to look at today are:
- Recruitment costs
- Professional advisors
- Your marketing spend
We also know how hard you work to raise investment, and how important it is to feel confident you’re meeting the financial milestones you committed to when you pitched. Understanding where you might be at risk of wasting cash in these areas can give you the oversight you need to make the best decisions for your business.
1. Recruitment costs: have a strategy in place before building your team
When you’re rapidly building a team, a lot of money, time and stress can go into recruiting. Recruitment companies will help you fill a position, but they’re not looking at long term team strategy. You can end up sifting through a long list of applicants with no way of deciding what makes the right fit.
Talent acquisition is very different from recruitment. In an ideal world, you’d have already worked on a talent acquisition strategy before you had any investment money. That way you’d have a pipeline of people you want to be talking to ready to go. Take note if you’re in the pre-seed phase – now is the time to plan ahead! We’re always advising founders to build a business, not just grow it. Think long term.
It’s not too late to start if you already have investment money in your hands.
Consider:
- Your team culture and how you will measure a candidate’s suitability – so you’re not simply dazzled by a CV.
- Your hiring and onboarding process – so you have a system that works for you and gets the most value out of your hires.
- Your team structure – so you’re working to a long term pipeline and spending at the right time on prioritised roles.
2. Professional advisors: have the end goal in mind when you choose who to work with
Similarly to investing in recruitment support, we come back to the same advice “build don’t grow”. Instead of regularly spending out to fix immediate problems, think about your long term plan and look for advisors who create lasting value. It’s a much more impactful investment.
Take lawyers for example, a short term problem looks like:
- We just need sales T&Cs.
- We need to get this deal signed.
What creates lasting value is having your own solid licensing agreement, one that you use for all your clients and customers. If you pay to have that developed now, all your contracts will be aligned and tickety-boo when you come to exit, and weighted in your favour – so you can pass due diligence and you maximise exit value.
The same goes for financial advisors. Tech companies simply have too many moving parts for traditional accounting practices to be of real value. It can become costly fast if you don’t have an industry expert on board looking out for your business – on both your time and your budget.
An experienced B2B accountant will know how to raise finance, scale up and manage investments. An excellent one will have the next stage of your business in mind at all times. Both need to be exemplary bookkeepers with a skill for making every penny work. Read our blog post on what it looks like to have a specialist accountant for a B2B tech business.
A note on business coaches
In our experience, a business coach is a worthwhile investment if they’re coaching you. We believe business coaches should help you overcome your limiting beliefs and barriers and help you become a better version of yourself. Be mindful of expensive coaches who haven’t been there or done what you’re doing. If they don’t have the same kind of business experience, they’re neither a mentor or coach – they’re an overhead.
3. Marketing: be aware of shiny thing syndrome
In the arena of marketing there are a lot of shiny looking things you can throw your money at. A lot of those shiny things are going to be ineffective and inconsistent without a marketing strategy.
Before you know it, you’re drip feeding resources into a pay-per-click (PPC) campaign without having truly understood your ideal customers and the problem you’re solving for them.
What you really want is feedback. Get feedback from potential customers so your product can solve their problem more completely and become something they not only want to buy, but can’t live without.
Taking it back to point 1 on recruitment costs, your employer brand is another worthwhile and vital marketing spend today. Much more lucrative than chucking a load of money at adwords or sponsoring your local football team.
Getting clarity on your financials will unlock your fear of wasting cash
Know that you’re not the first founder to be kept up at night worrying about spending investors cash. This is a fear shared by founders of B2B tech businesses in all stages of funding.
Getting a clear picture of your finances is guaranteed to make you more confident in your spending decisions. If you’re feeling the pressure of responsibility, not knowing how you are doing and wondering if you are keeping your promises is a difficult place to be. We don’t want that for you.
In line with our ‘think long term’ advice, we assess where you’re headed so we can drop in the specialist resources as and when you need them. As your outsourced finance function, you get a whole finance team for a fixed monthly cost you can depend on. Get in touch so we can help you get a better night’s sleep.