money

Building a viable product and acquiring customers with little to no financial support is not an easy task. These financial constraints require early-stage entrepreneurs to engineer creative methods to cut costs and maximize value on paid services. I am fascinated by these cash-flow ingenuities since they can often be a critical component to a startup’s financial stability.

In an attempt to open-source these cost-saving strategies, I asked my fellow entrepreneurs at SURF Incubator to share their secrets. I think it’s important we highlight their inventiveness (and hustle) especially now that Washington is considering a B&O tax credit for startups. As every startup founder knows, even a small amount of financial support can make a difference and increase the chances for success. Perhaps by sharing these strategies, we can all operate more efficiently and find our way to profitability.

surfincubator11Here are 11 cost-saving startup ingenuities:

1. Ask for discounts

“When our team needs an awesome web product like Teambox or KISSMetrics, I always try and email the CEO or someone in biz dev and ask for the product for free. I offer to be a brand advocate and blog about the product. It works maybe 40% of the time.”
— Adam Lieb, co-founder and CEO, Duxter

2. Free advertising

“While people spend money on Super Bowl ads, we go to the Apple and Microsoft’s retail store and load www.attendible.com on all their display devices. So if you ever see Attendible on an iPad or Windows Phone you know we were close by :)”
— Georges Khoury & Sara Farhat, Attendible Team

An example of a cost/value chart.
An example of a cost/value chart.

3. Cost/Value Chart

“We watch our expenses closely and keep a rough “cost / value” chart (see image to the right) for business services. If we haven’t been getting enough value out of a service, we discontinue or up our usage.”
— Keller Smith, co-founder and CEO, Appetas

4. Leverage free food

“I almost never need to eat out. After all there is something called free lunch, be it a start-up event or a lawyer trying to court you. If it is an “event-less” day, I carry my home made sandwiches with me. Caution note: Don’t value a free lunch over your most precious resource- time. Don’t be an ‘event hopper.’”
— Anup Chathoth, co-founder and CEO, UBI Interactive

5. Managed hosting

“We have ditched AWS for Hetzner and Wowrack bare iron servers running CentOS, at somewhere approximating 25% of the AWS price for comparable systems.”
— Sky Kruse, co-founder and CTO, Duxter

6. Procrastinate purchases

“There’s a principle in computer programming called YAGNI, or “You Aren’t Gonna Need It.” Use this to judge expenses as well. Sometimes it simply helps to procrastinate: do you *really* need to add that cost now, or can you put it off? Do the simplest things that could work, and only spend money when it hurts not to.”
— Paul Watts, co-founder and CEO, Gatherball

mollysfridge7. Molly’s Fridge

“I use Molly’s Fridge A LOT to save in the food budget.  If you are not familiar, Molly’s is an organic food distributor with small refrigerators placed in office buildings around Seattle.  Very frequently I grab a salad, sandwich or wrap for a quick bite during the day.  It’s not very expensive and dissuades me from spending more by going out with coworkers or other founders for lunch or dinner.  And since my company provides the mobile payment technology, I am also making a little each time I have Molly’s. Talk about eating your own dog food!”
— Nick Hughes, co-founder and CEO, Seconds

8. Network Recruiting

“This is monumental to our growth. We network with fellow residents at SURF Incubator as well as reach out to Seaton Gras and Neil Bergquist. Both of whom are always good for a solid and much needed connection. People have been asking me how I found someone a lot lately and almost every time I attribute the connection to being at SURF.”
-Patrick Henley, founder and CEO, AMP Tablet Solutions

hotwire9. Airline Miles and Hotwire.com

“I have been using frequent flyer miles for airfare to meet investors and potential customers.  I also book hotels through Hotwire by designating an area vs. a specific hotel.  Recently paid $90 for a 5 star hotel and $68 dollars for hotel next to a convention that was charging $175 ‘discounted rate.’”
— John Delano, co-founder and CEO, SaltBox Learning

10. Use social media to find early adopters

“In a startup, your first 100 customers/users are crucial. Getting feedback from this group will help you validate/iterate on your value prop and early product. But how do you find these first 100 customers? Most entrepreneurs turn to Adwords or some other form of paid media to get the word out. Going this route usually leads to low conversion rates, a steep learning curve to optimize effectively and a $1,000+ expense. Instead, I would encourage you to save this expense until a later date by finding your early adopters on social media. Everybody is publishing their interests and bio information on the social web so it can be really easy to target your ideal profile. You can use tools like Socedo or HootSuite to identify the right people. Reach out to these folks, ask for their help and build a personal relationship with them. Now you’ve deferred the advertising expense to a later date when your product is ready for primetime. This also sets you up to get good low-friction feedback in the early stages since these users feel that they know you as the founder.”
— Aseem Badshah, founder and CEO, socedo

11. Invest in bartering

“Chances are, someone needs whatever you do.  Chances are, whatever they do, you need.  As an entrepreneur, it is vital to build strategic relationships centered around valuable trade-offs. Because, through these relationships, you not only save time, money and heartache, but you also build an amazing network that continually grows, and thus pays even greater returns. Five birds with one stone!”
— Sam Chasan, founder and CEO, GrowthMindGoods

This is by no means an attempt at an exhaustive list. Entrepreneurs are constantly coming up with new ways to cut costs and maximize value. Please join the discussion and share your insights in the comments below.

Neil Bergquist is the director of SURF Incubator in Seattle. 

Comments

  • http://twitter.com/colinkimball Colin Kimball

    How about: Don’t rent or lease an office. Small Screen had an office and decided to move back home. It saved us $5k a year. If you are a small start up you do not need an office.

    • mattdyor

      You do not need an office. But you do need a community. No startup has EVER been built in isolation.

  • http://duuki.com/ Duuki Inc

    Virtual office works as well. Some people don’t need a full-fledged office when they start-up; Virtual offices are affordable and flexible and offers most of the benefits of a fully owned/leased office space and majority of the time, with no contracts!

  • Cale

Job Listings on GeekWork