Building a startup is more about dealing with chaos. Often that chaos lingers for longer than expected. You find yourself juggling ten things together. From launching the product, hiring the right people, promoting your business, constantly chasing profits, it is a lot to take care of in the opinion of Scott Tominaga. When you are cornered with so many things, the idea of investing on business may seem like pushing boundaries. Scott has worked with a long list of startups and helped them stay afloat despite all odds with his financial expertise. He claims that most startups make huge mistakes in investment and that leads them to failure. How and where you choose to invest your money can be the deciding factor for your startup. Not just in the financial markets, but in every decision that involves putting resources into something with the hope of return.
Scott Tominaga On Mistaking Spending for Investing
Too many founders throw money at problems and call it strategy. A rebrand, a new office space, an overhyped tool, they spend on these and call these investment. But the truth is – not everything you spend money on is an investment. If it is not returning value, it is just an expense. Real investment is intentional. Real investment is data-backed. Just because something feels good or looks impressive does not mean it is going to bring profit.
Starting Without a Capital
A safety net is important. When you are setting up a business, you must begin with at least one year expense in your bank account. Putting every last dime in your business is heading for trouble. Therefore, before you setup your business, you must build your capital and then only plan other things.
Chasing Vanity Metrics Over Real ROI
Follower count, subscribers, and likes on social media are all vanity metrics. These rarely add to your business profit. Unless your financial decisions add to the money in bank, you cannot call it a solid investment. Of course, every financial decision is not going to bring you money instantly. You need to keep an eye for real networking, solid financial leads, or promise of a big collaboration. Don’t chase follower count on social media, build real connection instead.
Ignoring Expert Adivice
You have the expertise in your field. But unless you are a finance major, you cannot call yourself an investment expert. Your business needs expert financial guidance. Mostly startups end up planning to spend money. They spend money on various things and consider them investment because they have little to no idea about what real investment looks like. This is where experts step in and ignoring them can be a big mistake.
You don’t have to be perfect in investment, in the opinion of Scott Tominaga. No one is perfect. Like everyone else, you will also make mistakes. Some mistakes will be costly, while some will be just errors. It is not about not making mistakes. It is all about – minimizing the effects of the mistakes. Even when your business will make big money, you will still make investment errors, says Scott. But the idea is – to protect your business from getting affected too deeply by these errors.
