Every startup has to keep their costs down. The question is how do they do that? Many meetings happen in coffee shops, where a typical coffee costs $4. Times that by 2-3 meetings per day, 5 days a week, 4 weeks a month, you get the idea.
Then you get into hosting, phone, office, and all the other bills. How do you keep your costs down? This is especially true with companies that bootstrap, where everything is out of your own pocket.
Here are a few things that I do:
- Drink water. Don’t get a cup of coffee. If you must, get a drip coffee or even a hot or iced tea. Save 100% to 50% off the cost of a latte
- Keep your hosting costs down. No need to pay for a gazillion users unless you have them
- Call your phone companies and get group discount/rate for having your entire team on the same plan
- Use as many free services as possible; Gmail, Google Analytics, WordPress, etc.
- If you have to drive, try to coordinate all of your meetings in one location. No need to waste gas at >$4 / gallon.
- Negotiate with your insurance company, see if you can get a discount by threatening to switch providers, works for phone carriers, credit cards, etc.
I have been doing the above, and have saved ~$1,000 / month. That isn’t pocket change!
Remember, every dollar counts! How do you save $$$$?
About nathan kaiser
Don’t eat out. Pack a lunch/dinner. On average lunch will run you around $8 where a prepared meal can run as cheap as $3. Do this for one meal a day and you’ve already saved $150 a month. That might ALMOST cover a tank of gas these days.
Also…a couple of other posts I wrote on the subject…
http://dathompson.blogspot.com/2006/05/secrets-of-entrepreneurship-dont-spend.html
http://dathompson.blogspot.com/2006/03/secrets-of-entrepreneurship-find.html
I disagree with some of that. For example, the free services thing. There’s no such thing as a free service. The cost comes in a number of ways. Either from ads, downtime, changes… or transitioning. When you outgrow the service or realize a better solution, it usually costs more to make the switch than it does if you had just gone with the better solution to begin with.
Sure you may be saving $5/mo, but in the end it costs you more.
Ways I save money:
- Network and find experts. In the last week two people have saved me probably $50k in legal fees.
- Use a credit card that offers extended warranties and cash back. I had a high end display die two weeks after the warranty period. Amex added 1 extra year and that saves $$$. Many cards offer points back, but the return is usually around 1%. One card I use gives me 5% back on gas, office supplies and wireless.
- Unless you know something is going to be scrapped, do it right the first time. That way you spend your time and money solving good problems instead of bad problems.
- Don’t buy things the way everyone tells you to buy things. For example, don’t buy a car from a dealer or a private party. Buy it from a broker. I just bought one for roughly 50% of what private party value was. I can drive it for two years and sell it for a profit.
My favorite topic!!
You can also make coffee or espresso at home. I buy Tully’s beans and make 8oz of espresso each morning which I then pour into a water bottle with ice. It stays cold all day long so I can sip as the day goes on (even caffeination level), and it costs $0.23 for what would otherwise be two venti iced Americanos ($5.48 at Starbucks).
Take the bus. No parking fees, no gasoline … I was going to buy my new jetta a couple weeks ago but now I’ve decide to wait until the end of the summer when it’s not such nice weather for biking/bussing.
Plan your weekly meals ahead of time and have them delivered by Safeway.com or Spud.com. (I did a price comparison and Spud came out $6 per week more expensive for our house, but it’s 100% organic and Safeway is not. That’d be an individual trade-off.) No gas to the store, no time wasted at the store, and no impulse purchases.
Cancel your television. It’s evil, and more importantly, Hulu.com is free.
If you’re a business, you should hire an efficiency consultant to give your expenses and operations an objective fresh look. (Like, say…. me!) They’ll have the best resources on where to save the most money, and save you having to do all the legwork.
Use the library or swap books with others instead of tithing to Amazon.com
In our case, we got a great deal on office space. We pay $600 a month for four rooms (3 offices and a breakroom), about 800 sq ft total. It’s in the heart of Capitol Hill, so there are many lunch options and two of us live a block away.
It took about a week of trolling Craigslist, and it was entirely worth it.
One philosophical trick I use to keep spending down, is to make the initial answer to any expenditure request “No”.
That way the first response to a discovered is to be creative and see how you can use what you already have instead of “Buy something”.
Through that process see how you can make do, you can also make a solid case for “need” and also define the process as to what exactly is “needed”.
The two biggest money wasters I see are buying “Too much product” or “Not quite what we needed”.
Everyone has to spend money on product and services but the more precisely you can target the dollars you spend, the fewer overall dollars you will spend and the more value you will get for those dollars.
Just my nickel.
I think a bootstrapper’s true scarce resource is time. Determining how to be most effective with how you spend your time is more important than spending too many cycles on trying to save nickels. As a side effect of cutting out ineffective activities you will tend to cut unnecessary expenses.
As a second observation, I think bootstrappers fail when they don’t start selling soon enough. Sell what you have now. We shifted from meeting in coffee shops to finding locations that would rent rooms with a white board for $15-25/hr (if the prospect doesn’t have an office). Most serve free coffee or you can bring in a thermos, and the conversations can be a lot more productive with quiet, a whiteboard, and fewer concerns about who may be listening in.
“Lost wealth may be replaced by industry, lost knowledge by study, lost
health by temperance or medicine, but lost time is gone forever.”
Samuel Smiles
On the subject of coffee specifically, I have a rule that goes as such:
“Cassie may have no more than 1 shot of espresso in any given 36 hour period.”
My reasoning is that, for a social get together, coffee is pretty cheap. Let’s say it’s $5, because I always tend to tip a buck. $5 for hanging out and chatting with someone for say, 2 hours, is a really low cost and a nicely casual activity. At $2.50/hour, it’s way cheaper than dinner and a movie if you’re on a date, cheaper than lunch or kicking back a few more potent drinks if you’re networking and/or socializing.
However, if coffee becomes a daily (or greater than daily) habit, a need and an addiction, it’s no longer efficient. It’s suddenly a $100+ per month habit that is costing you more than your iPhone and really, how much enjoyment are you getting out of it as you dash to work compared to when you’re sitting down and chatting with a friend? Not much. The returns in this use are dismal. Plus, you can end up with those nasty and bossy lack-of-coffee headaches if you fail to please the cafe gods on any given morning.
So, I minimize my coffee intake to keep it from becoming a habit, and maximizing the benefits when I do enjoy it.
/stereotypical Seattleite rant
Yeah, you save money by having a hard-core bootstrapping mentality, pinching every penny, etc. but I’d like to add the following:
Make your mistakes as cheap as possible — why spend 2 weeks developing a feature, when you could get a simpler version out in the market in 2-3 days and see if you did it right, if your customers like it, etc. You know you’re going to make mistakes, so spend as little time as possible getting to the point of either market validation or knowing you got it wrong. Goldplating is extremely expensive.
Get over yourself — you’re not important so don’t spend money just to make yourself look good. I think sometimes companies spend too much time/money too soon on marketing or PR before they’ve demonstrated a product/market fit, maybe just because they like to see themselves publicized (kinda like how some people talk without adding anything, just to hear themselves talk and feel important — which come to think of it, may be what I’m doing now?!).
Focus on mitigating risk — don’t spend money on areas that just don’t correlate to company risk. For example, don’t get an attorney to write/review an NDA — that is likely the least of your worries. Why spend time/money on a 8 page agreement when a simple MOU would do for a trial (and also speed up your sales cycle). Think only about that which is most likely to kill you, and focus your resources on that.
For tech startups, save the office space cost by using home office or virtual office.
Nice post, you got some good points there – thank you.