10 Smarter Ways to Save Money in Your Business
By Melvin Wong on The Capital
We often hear of the famous saying “a penny saved is a penny earned”. That notion truly applies in the business world.
Not surprisingly, some of the world’s greatest businessmen are painstakingly frugal with the likes of Steve Jobs, Jeff Bezos, Warren Buffet, Mark Zuckerberg and Ingvar Kamprad of Ikea. I personally started my first startup with merely $3,000, so being cheap was the only option I had.
Since this virtue served me well throughout my entrepreneur journey, here I’d like to share the same money-saving tricks that helped grew my company to its acquisition.
Digitize everything
Having got my first PC from my late aunt when I was 15, I had the comfort of getting used to digital technology. Thus, I tried anything I could to be completely digital in my company when I started. From eBooks to automated IVR (interactive voice response) hooked to my old PC to act as my customer support personnel (no pen and paper for note taking). I once even lectured my fresh graduate coder to stop printing out those PDFs I emailed him.
Enroll in online courses
We need to upskill every once in a while, especially when you’re in the fast-moving tech industry. With that in mind, we usually attend or send our team to workshops or seminars which can be rather costly. Instead, consider using online courses which can be 10 times cheaper than the classroom version. I run an e-learning site that provides online business courses for the fraction of the cost of the offline counterpart. Best is, you can always “rewind” and ask the instructor questions even after the course is over.
Only pay when you get paid
I’m not talking about salary here. I’m referring to your vendors and suppliers. The common term we use in business is “back to back” — I pay you only when I get paid. Which translates to once my client pays me, then only I will pay you. Almost every B2B business extends a credit term to their clients. So, we don’t necessarily have to pay up immediately when the invoice arrives. To keep your cashflow running smoothly, only pay your vendors once your invoice is paid by your clients.
Rent somewhere affordable
Your office rent is probably the most expensive monthly office costs. If you’re not running a retail shop or an office that accepts customers, the frugal way dictates that you should rent somewhere that is affordable for your business. Sometimes I see companies insisting on being at highly expensive central business district (CBD) areas with sky-high monthly rentals just for the sake of face. Virtual office (office without a space, but just an address) or co-working space is an option. During the first 2 years of my business, I actually rented a virtual office with a super-cool address (some office tower) and worked from home. So that when I had to offer my business card, I didn’t feel insecure about my office location. In fact, I actually managed to fool a lot of people. You could also try a small office at a CBD but have your operating branch somewhere that is cost-effective.
Pay yourself less
This is a tough one. A true entrepreneur should be able to embody the delayed gratification spirit and know that the gain of running a business isn’t in the salary but the dividend, bonus, and exit. Mark Zuckerberg famously receives only $1 per year working for Facebook. Yeah sure, you might argue that because he’s a billionaire. But Robert Hull of Adaptive Insights suspended his salary for a while until he got his Series B funding. I got paid the minimum for many years even when my company was profitable. My peers were making a lot more than me. Usually, at times of trouble or just being careful with cash flow, the first expense to trim is you.
Join government programs
Small and medium enterprises usually make the bulk of companies in a country and governments depend on these entities for income and job creation. Thus, governments tend to offer assistance to these economic drivers in terms of grants, subsidies, training, support and more. Tap on this free money while you can. These programs normally don’t last forever. Check the requirements for each program to ensure you are eligible.
Barter trade with fellow entrepreneurs
You might have other contacts who are running their own businesses and they might have something you need and vice versa. The cheapest way is to barter trade. If you could spare your programmer, help build them an app or website while they help you in marketing or office supplies. Since they are friends, you could easily write off any excess “debts” over dinner or beers. When I wanted to venture into the mobile app development business, we didn’t have any apps to show on our portfolio.
A friend of mine who managed a huge business media company wanted one so I offered to build for them for free. In return, we got free publicity on their popular business media and on the app, which resulted in abundant of inbound leads. Heck, even budget airline does it. A friend of a friend was paid with air tickets for software work they did for a discount airline.
Hire interns
This is quite self-explanatory and I reckon most startups hire their first few staff straight out from school. The trick here is to hire the cream of the crop. Foster good relationships with universities and colleges or even lecturers so that they could offer you pole position when it comes to picking the best undergraduate trainees who could produce more for less. I hired quite a few interns before and some of them could easily win rookie of the year awards. Some I converted to fulltime but some I couldn’t afford to. But I’m forever grateful to them.
Get mentors
Mentoring is usually a voluntary commitment and they become mentors with the genuine drive to want to help entrepreneurs. Otherwise, why waste time helping people for free when you don’t like helping them. Having said that, you should seek your mentor's help when you’re in need of advice. Instead of paying like a lawyer or an HR expert, seeking your mentor's help could save you a lot of unwanted bills. I personally had a few amazing mentors (Jeff Hoffman of Priceline, Francis Wong, Lucas DiLeo, and Chris Chan) and I’m grateful to all of them. Some opened doors for me while some spent countless of hours with me over Skype and coffee meetings listening and fixing my business problems.
Get a woman to handle your expenses
It’s a fact in my business life that women are a lot better in managing money. I guess that is why many of them turned to finance and accounting as profession. My accounting clerk had helped me saved thousands of dollars in my company’s expenditures plus managed my bookkeeping to tip-top condition. Get a female rather than a male to manage your finances is the way to go.
