One of the most impressive young entrepreneurs in the state of Utah shared with me this week some of the ways he has cut corners and cut costs to preserve his cash. I was super impressed. I don’t know how you teach this, but entrepreneurs who have instincts and smarts about cash preservation combined with creativity and operational skills will succeed big.
My friend had a bunch of old, mostly orange and green chairs. I jokingly asked him if they cost him $10 a piece. He said, “less. Actually we bought 20 desks for $500 and got all these chairs for free.” A marketing company was selling its fixed assets and they furnished their several thousand square feet of office space for almost nothing.
His office space is close to the railroad tracks–“the closer you are to the tracks, the lower your rent” he says–and he pays only $0.39 per sq ft per month — about 1/3 of what everyone else I know is paying. The space was actually quite decent.
He pays $1,000 per month for a billboard to recruit potential web developers. That seems like a lot of money, but compared to the $23,000 he spent employing one developer who wrote poor code — none of it could be used — the $1,000 per month to improve his talent pool is a great investment.
He sends out tons of direct mail. He calculated that it would be cheaper to use a one-window envelope with the mailing address printed on the letter inside than a two-window letter. But rather than pre-printing his envelopes with his logo, he found it far cheaper to buy an envelope printer and print his return address. He got a $4,500 envelope printer on eBay for $500. He saves hundreds or thousands of pennies everyday the way he does his direct mail. That adds up to hundreds or thousands of dollars a year.
He found a source for ink toner where he pays $10 for recycled instead of $200 for a new toner cartridge.
Once he wanted to use a photo of a well-known person for an advertising campaign. The person’s agent wanted about $2,000 per month. But my friend found a stock photo of the same person on rubberball.com for $59.00 — a one-time fee for unlimited use.
This is the kind of entrepreneur that investors love because none of their cash goes into luxurious office space, or high salaries, or a “we’ve got it made” attitude.
I wish I had the money saving instincts that my friend has. My primary money-saving virtue is that I hate taking money out of startup companies in the form of board fees or salaries. In my first startup 15 years ago my partner and I took $18,000 salaries for a very long time. And more recently I’m saving big on development costs by using open source wherever possible.
CEOs who can figure out how to get by with very low expenses will find their equity value will increase significantly faster and their harvest will be much, much greater.
What money-saving tactics have you found most helpful in your own startup company? What is the best cost-saving measure you’ve ever taken? Please share your comments.
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