7 Frugal Startup Tips from Millionaire Entrepreneurs
You don't win in business by wasting money. Even the most successful entrepreneurs pinched pennies in the early days--and many still do. Here, several multimillionaires share their best cost-cutting tips when you're trying to get your startup off the ground.
1. Cash in credit card rewards. Before the success of the George Forman grill super-charged sales at his direct-response television marketing firm, Rick Cesari became resourceful in using his credit card points to buy event tickets or thank high-performing employees by sending them on weekend getaways. Today, the founder of Seattle, Wash.-based Cesari Direct, charges between $125,000 to $200,000 on an Alaska Airlines Visa Signature card, and still uses the rewards to save several thousand dollars each year on employee perks at his $5 million company.
2. Skip the fancy furniture. "I didn't buy new furniture for the first six years I was in business," says Brett D. Reizen, CEO of Entertainment Benefits Group, LLC, Aventura, Florida, a $100 million provider of travel and entertainment services. Of course, you can start by checking out local used furniture shops or search on Craigslist. There are also furniture rental services like CORT, which can reduce the upfront cash you need to outfit your office. It also sells that rental furniture at deep discounts when clients are done with it. Find more online at CubeClerk, an office furniture marketplace.
3. Recycle and reuse shipping supplies. Even though his online garden supply retail business, Growers House, skyrocketed to $2 million in revenue in its first nine months, founder Nate Lipton only spent $300 on shipping supplies. Whenever the Tucson, Ariz.-based business receives its shipments it turns around and reuses all the boxes. If you're shipping via Priority Mail, the U.S. Postal Service also offers free boxes and envelopes. Of course, there are discount cardboard box sellers, such as UsedCardboardBoxes.com, you can turn to as well.
4. Be creative about space. Instead of springing for a posh office to sell RetroFitness health club franchises, founder Eric Casaburi used an extra room in one of his health clubs. It wasn't pretty, he says, but it saved him more than $10,000 in office rent and also fit with the company's bare-bones brand image. Co-working spaces are another option to cut costs. Cambridge, Mass.-based HubSpot was headquartered in a Boston co-working space until it hit 100 employees, sharing conference rooms, coffee machines, and even a receptionist and phone system. LooseCubes and CityFeet are good directories of shared and co-working office spaces.
5. Check out deal sites. Liz Gaspari, co-founder of Gaspari Nutrition, an $8 million nutritional supplements company based in Lakewood, N.J., uses daily deal sites like Groupon and LivingSocial to offer employee perks. Whether it's through discounted meals and shows or gym memberships, the coupons have saved the company hundreds of dollars, she says. When it comes to business purchases, sites like RapidBuyr and Bizydeal can help you save on computers, office furniture and supplies, and even training courses.
6. Cross-train employees. Startups are no place for a "that's not my job" attitude. After Jeff Platt began to train employees to fill multiple roles at his Sky Zone Indoor Trampoline Parks, he saved more than 5 percent on payroll for the $15.7 million Los Angeles-based recreation company. Casaburi did the same thing at RetroFitness, attending his first International Franchise Association trade show with the manager of one of his gyms acting as a franchise sales representative. "Having employees move from hat to hat to hat saves you money and keeps your operations lean," he says.
7. Do your own research. In his boot-strapping startup days, Casaburi also used to conduct his own market reach by sitting in parking lots of prospective locations and counting the car and foot traffic to see if there was enough activity to support a new gym. He analyzed every metric, such as population, vehicle and foot traffic, and other aspects of his most successful locations and tried to find locations that had similar activity and characteristics. Now that he's staffed up, he no longer does this himself, but he estimates he's saved more than $100,000 per year in salary or consulting fees before he hired help. Instead of hanging out in parking lots, you can take advantage of technology like ZoomProspector, a free service that lets you find communities by parameters like community size, education levels, and recent job growth.