Frugality in a Start-Up

A lot of start up companies claim to be “on a shoestring,” have “tight resources,” “cutting corners,” and the like. Indeed, the frugal start-up is one encouraged by CEOs, advisors, investors, and analysts. But when does being frugal make sense versus cutting a corner you can’t afford to cut? At Comcate we have faced this predicament many a time. For the most part, our frugality has allowed us to grow under tight capital. We can devote more resources to sales and product development and less on miscellaneous overhead. But this shoestring mindset has backfired, too. A new employee recently got an inexpensive monthly cell phone plan, promptly exceeded his minutes, and we had a $230 phone bill for one month. And other times the debate over how to save a dollar or two on one thing or another has resulted in us being able to accomplish that thing in the amount of time we spent debating. Based on my experience, here are a few quick things you do want to think about how you could be creative in financing the activity or service:

  • All office equipment – multi-purpose all in ones, laser printers over ink jet (ink costs will catch up with you), a cell phone for both office and the road, are just some of the ways you can be frugal in the office. This is an easy category.
  • Southwest Airlines – Period. On Southwest they count “miles” as segments. So you could fly up and down to LA earning segments and then use those segments to fly across the country on Southwest to Hartford, Conn. If you operate in an area near a Southwest airport, and an investor asks “where is your market?” just say “Anywhere Southwest flies.”
  • Generic sales material – I used to try to customize each handout and sales literate to the prospect I was visiting. Looking back, I see a lot of wasted dollars and hours at Kinkos trying to customize each brochure. Do it once, make lots of copies, and don’t worry about changing the logo at the top to that of the prospect.

Here are some things you don’t want to be thrifty on:

  • Business cards – A first impression means everything and this is your first print impression. Make it good.
  • Laptop – A sluggish system will cost you an untold number of hours. Get a high performing PowerBook and consider it done.
  • In-person demo’s – WebEx or Placeware is good for training and inter-company communication, but always meet the potential client in-person. Resonating with someone has more to do with kinesthetics than anything else.

I left much off this list, just some quick thoughts. In your experience, where have you found frugality work or not work?

2 Responses to Frugality in a Start-Up

Leave a Reply

Your email address will not be published. Required fields are marked *