frugality (noun):
The quality of being frugal, or prudent in saving; the lack of wastefulness.
There’s Wisdom in Frugality
Benjamin Franklin was famous for his love of frugality.
Amongst his many other accomplishments, the timeless Poor Richard’s Almanac was full of pithy sayings on money, like:
Benjamin Franklin didn’t have anything against the accumulation of money or wealth (he was in fact, a self-made man of means himself), but he understood the dangers of living as if one has means, when in fact they do not.
To Franklin, it was not only detrimental to successfully moving forward for the individual, it also had sweeping social ramifications. Franklin seemed to understand that the entire world was hurt when someone lived ‘expensively’.
Doing Things Differently For Your Startup
Being frugal in business does not mean that you are afraid to spend or to raise money.
It’s about spending money only on what you know is going to bring you clear value, and raising money when you have clear need to do so.
A much-discussed phenomenon has occurred in the startup world in recent years, where VC money is seemingly boundless and many seem to feel it’s akin to a ‘right of passage’ to raise money for their startup.
It’s not!
Raising money for your venture is, and should always be, treated as a means to an end. It is not necessarily a business accomplishment in and of itself, however, with the right game plan, it can empower you forward to be a shining star in your industry.
You do need to be careful about giving away too much equity, however.
The height of Covid-19 lockdowns was demonstrate-ably that “Do or Die” moment for startups to raise money in order to stay afloat.
Some were successful, and many more made significant cuts to their spending.
That isn’t to say it’s impossible to raise VC money right now, as more than a few opportunistic and eagle-eyed VCs have earned their fortune making a bet during an economic downturn.
But in the months to come, many startups are going to be making difficult decisions to stay afloat, and what many like to avoid saying (but we are going to, for your sake, dear reader), is some of that could have been mitigated if they’d been observing the art of frugality in a new business venture all along.
The Difficult Road Ahead Is Paved with the Spoils of Startup Splendor
Large, airy open-floor workspaces. Hiring blitzes. Break room with all the fixings.
These are all expenditures one typically sees once a successful startup has established itself, or is looking to do so.
Here’s the thing: You don’t need this to be successful.
In most cases, you don’t even need a dedicated office space, as many companies discovered for themselves amid Covid-19.
The days preceding the mandated stay-at-home order were filled with announcements of VC darlings like Wayfair and ZipRecruiter laying off or furloughing employees.
They were forced to scale down to only the bare essentials, which begs the question: Why staff so far beyond their means in the first place?
Hustle culture and hyper-growth is typically what’s expected at a VC-backed venture. But that’s not every venture.
There’s a reason unicorns are rare. Many startups expect to follow this path anyway: Raise Money, Scale Big, and Successfully Exit. But there’s a middle path here to be carefully observed, and that’s methodical growth and careful scaling for your tech startup.
You never want to get too big for your britches.
Keeping Your Eye on Your Bottomline
This seems obvious, right?
But too many startups get overeager about ‘officially launching’ their app to the world.
Each and every day should be treated like the launch of your app. Coming up with new ways to position your app, build traction, and gain future users — this needs to be a day one endeavor tackled daily for a successful app launch.
You might be tempted to bring on additional team members, and start looking at renting out dedicated work spaces to base your app operations out of, but hold your horses.
Once your app is officially launched, your needs will vary widely!
You need the flexibility and freedom to be able to quickly pivot, and adapt in a chaotic marketplace.
Getting yourself locked into a lease before your app is launched is putting additional stress and financial variables that could otherwise be effort spent towards your app (or whatever other unknowns may need to be tackled).
According to a survey by Gartner, CFOs and enterprises are making key shifts to manage cash via COVID-19 shutdowns:
– 81% of CFOs plan to exceed their contractual obligations to hourly workers and to fund that they are using remote work to offer flexible schedules and maintain operations.
– 90% of CFOs said their accounting close operations will be able to run effectively without disruptions off-site.
– 20% of CFOs said they are cutting their on-premise technology spending with 12% planning the same move.
– 13% of CFOs have already cut real estate expenses with another 9% planning cuts in the months to come.
– Nearly a quarter of respondents said they will move at least 20% of their on-site employees to permanent remote positions.
If there is any place to spend time, money and effort early on for startups, it’s in your marketing efforts.
Just be sure to focus on building up a brand platform filled with original content that’s mission-focused, not necessarily spending money on advertising early on.
This will help you earn an early audience of highly-relevant supporters quickly and most cost-effective to your efforts.
It will also add an extra layer of legitimacy and authority to your brand, even as you approach app launch.
It’s About Optimizing Your Budget
According to another survey by Gartner, nearly half (42%) of all HR leaders are finding it difficult to save more money than they already have.
For many companies out there, the “ad hoc cost-cutting pressure” is difficult to face right now. Reducing employee work hours and head count, freezing hiring and promotions, even limiting service offerings, are all active measures being taken in order to cut operating costs across the board.
Right-sizing at companies right now requires tailoring like no other — businesses need to be able to rapidly bounce back at the first sign of ‘normalcy’ in the marketplace, even as they focus on scaling back.
Between the early Covid-19 lockdowns, ongoing market fluctuations and recent recent economic downturn amidst rising inflation, the stakes to save are high.
Final Thoughts
Cutting costs towards things that may have previously been the lifeblood of your company is far from easy, but it can be quite gratifying to come out on the other side to realize that what makes your company ‘tick’ can still exist in a much leaner fashion.
Moving forward, companies and startups alike should focus on making more effective use of technology to increase work output and reprioritize processes.
As Benjamin Franklin himself once said:
What do you think? Comment below.
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