Don’t ignore costs because of startup growth dogma
Picture yourself walking into Staples and seeing a $3,000 product you know your business will use for the next 5 years.
How much thought goes into that purchase?
Write-off or not, you’re probably in for at least a couple hours of contemplation before you dust off the ole credit card.
Heck, I might even need a lengthy music montage before I can sign off on the purchase.
Are there cheaper options elsewhere?
Do I really need it?
Can I get by without it?
Contrast that with the last $50/month app I signed up for.
Suddenly everything changes.
The sky’s part, the sun comes out and the birds start chirping. Is it a somewhat interesting looking app? Let’s trial it.
Turn out it’s moderately useful? Let’s sign up.
But hold on a second. In the same timeframe (5 years), the total I spend on this app will come out to … $3,000.
What’s going on here?
Why does my decision-making process change so drastically on a purchase that costs the same?
Last night I got a pit in my stomach when looking at past purchases.
I couldn’t believe how much money I spent.
With a new baby at home, I would feel a lot better having money I spent on my business in years past in the bank instead.
And that’s what’s so lame about everyone constantly yelling at you to focus on growth over spending.
Twitter, hacker news, slack, and everywhere else meets the mere thought of cutting expenses with a chorus of groans about how you should: focus on growth stupid, it’s a better use of your time!
Does anyone else feel like they’re taking crazy pills?
It takes a few clicks of the mouse to cancel an app – how can saving thousands of dollars in a seconds be such a waste of time?
What’s more, I plan on being in business a long time.
Ignoring my costs means ignoring my profit margin.
After all, there are really only two ways to increase profit:
- Make more
- Spend less
No matter how fast you grow, if you don’t have a handle on spending, your costs will rise to meet your income.
I know. I’ve mindlessly consumed business products for the last few years. At the time they all felt like a wise investment. Now? Not so much.
So how do we fix this?
One trick is to think about purchases in longer terms, like the example above.
No apps give you much value in a month. They deliver value over the course of years, if not longer.
So it doesn’t make sense to use a month when calculating whether you should budget for it.
Basecamp doesn’t cost $99 a month.
Basecamp costs $1,200 a year.
And suddenly email is just fine.
In fact, suddenly most apps aren’t worth paying for.
My business is now $5,000 more profitable this year. Yes, “just” by canceling a few apps and services.
Could the minutes I spent clicking cancel inside these apps have been better spent growing revenue? Who gives a shit.
I feel better being more conscious of every dollar I spend.
Cutting costs isn’t a waste. It’s an investment. Depending on fewer outside forces means your business is less fragile.
Having less overhead means you’re more likely to be around tomorrow.
I need to make less to stay in business.
I need to spend less time on learning tools.
I need to invest less in other products and more in my own.
So I’m making the commitment to myself.
Until I’m completely debt-free, I’m instituting a spending-freeze.
No is my new default.
It’s time to make more with what I already have.
And get rid of any overhead I don’t absolutely need.
Want to listen to me do this? A friend and I went through every single expense in my business recently with this new mindset.
Listen to the full conversation below.