My worst spends

As a once-stumbling, struggling entrepreneur, I made a whole host of really bad decisions. In fact, even now I continue to make a fair number of really horrendous decisions. But at the end of the day, rather at the end of the financial year, if the numbers turn out into a positive sum game, well, it's all in a day's work then. So here's my list of 'did-I-really-do-that?!?' blunders:

1. Print advertising. We were just barely managing to survive in the first few months of our existence, when a friend approached me and said we should put our name out there. So we bought out the first ad in one of the leading computer magazines in the country, and paid a pretty penny for it: Rs. 50,000/- (USD 1200) if I remember correctly. The grand total of leads we got from that was, umm..err..zero. When I mentioned this to my 'friend', he said, well the thing is you got to build your brand. This requires not just one ad, but you got to keep coming out with ads. So the only way to build on your zero response is to come out with another ad. As incredulous as it sounds, we did come out with another ad. This time at a discounted price of Rs. 35,000/- (USD 700). We got one call from that ad. It was from another advertising agency asking if we would like to associate with them for future ads! Well, not only did I lose that friend quickly, I also learnt that ad agencies work on a healthy 17% margin, and are obliged to pass on much of this to clients. That is how we were able to get two similar ads in the same publication at such different rates. The first time, the agency pocketed its commission, and the second time they decided to go easy on me, and pass on some of that discount. From that day onwards, we've never advertised directly in print media.

2. Headhunting channels: When looking for people to come on board we used the classifieds sections in various newspapers. For each ad we took out, I think it cost us in the range of Rs. 10,000/- to Rs. 12,000/-. Over a period of time, this ended up costing us a significant amount. Eventually, signing up with online placement channels such as monster.com proved the best bet. Even better is to locate individual head-hunters who will do the pre-selection for you, and get you a filtered list of candidates.

3. Internet connections: When we started out we fell into the cable/DSL Internet provider's trap who provide "broadband" connections. Broadband, my foot! Here is how it works. When they first enter a commercial or residential complex, they offer extremely economical packages. Once you've installed the DSL or cable modems, and paid them their upfront fees, you pay a monthly rental as per your chosen package. Now, the first 6 months go off great, and more users sign up, thus limiting the bandwidth you used to enjoy. So they come to you with a renewal offer, which if you pay up for the next 6 months in advance will guarantee a specific bandwidth and good service. Naturally, gullible as we were/are, we signed up for it, and as you might guess, the bandwidth got squeezed even more, and their engineers were never there to respond. This is where we should have immediately shopped around for alternate providers, and not kept paying the same provider hoping the service would get back to it's good old former self.

4. Long-distance phone calls: With a large percentage of our business coming in from overseas, we spent a lot of moolah communicating with partners, clients and consultants who were onsite. Setting up Skype or a VoIP solution would have saved us a lot of money. We have Skype now, but most people still need to be reminded to use that instead of the regular phone. In fact, I must admit, I usually prefer to quickly search in my cellphone for whomever I want to speak with, and simply call them up. The sucky Internet bandwidths don't help, but we really need to start using VoIP a lot more.

5. Annual client gifts: We still do this, but I don't think it really achieves much. You know the deal. Diwali or New Years, you go looking for curio sellers and get a thingammy put the company brand name on it, and mass-mail it out to clients. I really don't think it gets us anywhere. For instance, we normally send out about a 150-200 gifts, each priced at roughly Rs. 250/-. This is a healthy Rs. 50,000/- investment, but what does it get you? The client puts up your thingy on his table along with thingies from half a dozen other companies - calendars, pen-holders, card-holders and the like. Yes, you could get innovative and send USB chargers or other cool stuff. What I find more useful is to write hand-written thank you notes to those who really matter, and to those whom we are genuinely grateful for their business and support. I usually add some personal stuff into it as well, and sign off. This ensures it's not a bulk-produced thank-you note, on which I am simply signing.

Here's a nice post by Dharmesh Shah at OnStartups on "Spending money in the right places" - converse post to mine.

*Current conversion is approx Rs. 46 to 1 US$. So Rs. 46,000/- is about US $1000