Startup Frugality

You have a choice as a small company: Are you going to spend frivolously on things you don't need, or are you going to be appropriately frugal?

Being appropriately frugal means saving money on things you can save money on.

For example:

A. Buy all your office furniture used or get it for free.

Can get it for free? Doesn’t match? but who cares.

B. Buy all your equipment used.

C. You should fly economy

This is an obvious one, but I’m still surprised at how many people don’t do it.

There are many more you can do, but setting the tone of frugality is contagious. The rest of the team automatically starts thinking of ways to save money when you lead by example.

On the flip side, spend money where you need to spend the money. However, don’t overspend either.

Your situation is likely different, but here’s where I would recommend spending more money:

A. Hiring the best engineers you can.

However, this doesn’t mean you should overspend by paying above market. You’ll end up with a bunch of mercenaries if you pay above market rate.

In our case, we paid market rate, and it worked out just fine.

B. Having the appropriate software and tools for your engineers.

Releasing a hardware product costs a reasonable amount of money and time, so the more first-time successes the better. We never scrimped on the verification tools our engineers needed.

C. Get Good Medical Coverage For Your Employees.

We wanted our benefits to match up with our larger competitors. So we gave our employees great healthcare options.

And then we ate the cost increases as premiums rose each year to keep our employees costs low. This was a big selling point when recruiting new employees.

D. You Should Spend Money On Marketing.

Our business model was predicated on having thousands of customers buying from us, so we spent on acquiring customers. At the same time, we negotiated great deals with the various trade publications in our industry.

Whatever marketing channel you choose, you want to make sure you’re spending enough money to give yourself a chance of success.

E. You should pay your sales agents a good commission.

One of the smartest things you can do is not to be worried about optimizing every deal you make. It’s much more important to gain customers than it is to maximize profits. There will be plenty of time for that later.

Instead, you should pay your sales more than the average rate. You’ll have a more motivated sales force that sees they can make money if they hustle.

But the appropriately frugal mindset never changes once it’s established.