The Forgotten Budget: Why Operations Spending Matters More Than You Think

You're at Series A, $2M in the bank. Your board says "don't waste money on ops, that's overhead." So you don't hire a finance person, don't invest in systems, and keep everything lean.

By Series B, you're scrambling. Books are a mess, you can't close fast enough for audits, you're missing tax deadlines, and nobody knows if you're actually making money. Now you have to hire aggressively, onboard fast, and pay for all the cleanup you should have done earlier. Total cost: 2-3x what it would have cost to invest earlier.

This is the classic operations trap. Operations spending feels like waste until you don't have it, at which point it's a crisis.

What's Actually in the Operations Budget?

Operations spending includes:

• Finance: Accounting, bookkeeping, tax prep, audit support, financial reporting
• Legal: Contracts, IP, corporate governance, compliance
• HR/People: Recruiting, onboarding, payroll administration, employee benefits
• Finance Systems: Accounting software, financial planning tools, reporting
• Admin: Facilities, IT, insurance, vendor management
• Compliance/Security: SOC 2, data protection, security audits

The question isn't whether to spend here. The question is: how much, and when?

Operations Spending by Stage

Here's what smart founders spend on operations at each stage:

Seed Stage (Pre-PMF, <$1M ARR)

Series A Early ($1-5M ARR)

Series A Late / Series B ($5-20M ARR)

Series B+ ($20M+ ARR)

How to Think About Operations ROI

Operations spending doesn't have direct revenue impact like sales does. So how do you justify it?

The Risk Prevention Angle

Good finance operations prevents expensive problems:

• Missed tax deadlines: $10-50K penalties + interest
• Failed audit: Can't raise money, erodes investor confidence
• Messy cap table: Loses months during fundraising, kills deals
• Compliance failures: SOC 2, GDPR, data security breaches = existential risk
• Payroll mistakes: Employee disputes, lawsuits, regulatory penalties

Investing $15K/month in finance operations prevents $500K in risks. That's a 30x ROI.

The Enablement Angle

Good operations enables your team to move faster:

• Fast financial close: Board meetings happen on schedule, not months late
• Instant cap table: You can answer equity questions immediately, not hours later
• Data-driven decisions: You can run analyses, not spend days hunting for data
• Frictionless hiring: Recruiting moves fast because HR/legal don't slow things down
• Investor-ready: When opportunities emerge, you can move fast because your house is in order

Common Operations Spending Mistakes

Mistake #1: Hiring Enterprise People Too Early

You hire a VP of Finance with Fortune 500 background at seed stage. Now you have $200K headcount doing work for a $2M company. This is how you burn capital on overhead.

Better approach: Hire junior people or contractors early. Upgrade to experienced people when you're big enough to warrant them.

Mistake #2: Starving Operations Before Major Transitions

You skip finance investment until you're raising Series B. Now you need to quickly get audited, have proper books, and have a clean cap table. This is rushed, expensive, and painful.

Better approach: Invest incrementally. Better to spend $2K/month on a bookkeeper at Series A than $50K/month on cleanup at Series B.

Mistake #3: Using Cheapest vs Best

You hire the cheapest bookkeeper or outsource finance to the cheapest vendor. But cheap often means error-prone, which costs you later.

Better approach: Pay for quality. A good bookkeeper is worth 2-3x more than a cheap one because they're right the first time.

What to Do This Month

Don't overthink this. Start here: