At What Price?

When times are tough during start-up, you may be tempted to cut every expense under the sun to keep your business afloat. Beware, though-cutting the wrong things could end up hurting your business in the long run. Paul Rich and Seymour Siegel, principals of New York City CPA firm Rothstein, Kass & Co., weigh in on the types of cost-cutting start-ups shouldn't do, as well as the types they should. Listen up.

• Cost-Cutting Mistake No. 1: Choosing cheaper materials for your product. "I know of a company that was selling a garment and chose to use a cheaper material than the material used [for the prototype]," says Rich. The finished garment was not as colorfast as the prototype. "[The owner] had the whole order denied after he delivered," Rich says, "which cost him a fortune."

• Cost-Cutting Mistake No. 2: Cutting back on advertising and marketing. Getting the word out about your company in the early stages is necessary to success. You may modify advertising (i.e., switching from color to black and white) but don't eliminate it altogether, say Rich and Siegel.