Running a tight ship can pay off in unforeseen ways -- creativity and innovation mounts within an organization when resources are limited, and research suggests that companies with frugal CEOs are less prone to accounting errors and fraud.
As someone who came from humble beginnings, I learned the value of money before I reached my teen years -- I spent a good part of my childhood recycling classmates’ cans after school. More than 20 years later, as the CEO of a growing startup that has raised millions from investors, I’m still in many ways that frugal kid who would never spend more than is absolutely necessary. I evaluate every company purchase decision as if the funds were coming directly from my bank account.
It’s this mindset that has helped grow Retention Science into the lean and thriving company it is today, and I like to believe it’s earned me an extra helping of respect from my investors and employees.
Related: 9 Reasons Why Most Startups Fail
There’s nothing wrong with indulging on occasion, if it’s well deserved, but for the most part, when it comes to choosing between amenity and necessity, entrepreneurs running a company should stick with the latter.
Here are some of the ways I apply frugality in my business that might also work for you:
Office setup on a shoestring. I was determined to furnish our entire office for less than $1,000. Instead of buying brand new leather chairs, I turned to Craigslist and found a company in the process of shutting down and selling slightly used leather chairs for $25 a piece (compared to more than $130 at retail). We purchased a dozen and scored over a thousand dollars in savings. White boards can be pricy as well, so when we learned that $10 shower boards sold at Lowes can double as whiteboards, we opted for those instead.
Find ways to build an office that’s simple but functional. If you can find reasonable furniture on sale or at IKEA, then do it. Better yet, incentivize your interns or employees to find certain bargain pieces for you, because odds are they have some good connections.
Control legal fees. Legal fees are a huge chunk of change for any business, especially startups. Experts tell you to estimate $500 an hour for legal services. A good way to control your costs is to set very clear expectations with your lawyer when allocating their time. Also think about how you want to be billed. There may be instances when it makes sense to be charged hourly, but others where you’re better off paying on a per-project basis. Some lawyers may even allow a company to defer payments until it is funded. It never hurts to ask.
DIY marketing and PR. Don’t hire a public relations firm just yet. I held off on hiring a PR firm and instead did all the media outreach and pitching legwork myself. It took a lot of effort -- and some might argue it wasn’t the best use of my time -- but I took care to build trust and rapport with reporters and my strategy eventually paid off. They appreciated having direct access to a candid CEO, and we were able to get press coverage early on without spending a dime. Implement DIY marketing -- social media, blogging and media outreach -- while you can, and only hire a PR firm when you’re big enough to do so. You’ll save thousands of dollars in retainer fees.
Travel thriftily. Hotel costs while traveling can quickly add up, and can often be avoided. See if you know anyone in your destination and ask if you can stay a night at their place. There’s typically an extra bed or pull-out couch somewhere, if you're willing to ask, and you can repay the favor down the road. I’ve made countless trips to San Francisco in the last two years, and to date, I’ve managed to spend nothing on lodging.
Another cost-cutting option is to use a service like Airbnb, Hotel Tonight or Hotwire that tend be much more affordable than going directly through a hotel. Staying outside of a city -- especially if there is a conference taking place -- can also save you on lodging.
There is no shame in being a frugal CEO. When you’re running a startup under the watchful eyes of investors and with competitors hot on your tail, being scrappy isn’t just recommended, it’s imperative.