Everyone’s talking about bootstrapping these days. How to build and maintain a lean start-up the right way. Ensuring that our company has enough money to last through the rough patches. But we’ve heard time and time again that in order to make money, we have to spend money. And we do, frugally. We’re careful and slow to hire, we seek out the best deals before we make big office purchases and we’ll go without certain luxuries and amenities as long as needed. When we do spend, we stretch every dollar and we save, we’re pinching every penny. But are we holding onto those dollars too tightly that it becomes impossible for us to part with? Are we hurting our businesses by not spending when we need to? When do we spend and we do we save?
In every stage in our business, we should be saving, setting some money to the side. Even when we’re starting out. Ironically, starting a business is when owners spend the most. They’re paying the lease, getting utilities turned on, stocking inventory, paying accountants and CPAs, hiring their first rounds of employees, and setting up service accounts. Money is just slipping through their fingers. It’s no wonder that when invoices are being paid in full, they want to hold onto every dollar coming in. But every dollar needs to have its place. Whether we’re paying ourselves, our employees or investing back in the company, ever dollar needs to go somewhere. Holding onto to every dollar because you can isn’t making it work for us or our businesses. And yes, if we’re putting those hard-earned dollars in a business savings account, that too is considered working for us as well. But we have to be mindful about saving… and spending.
So, once again, when do we spend and we do we save?
SPEND – When we need help working in the business. This could mean hiring employees or contracting work and services out to someone outside the company. How do we know when we need employees or outside work? When we’re threaten with losing customers — current and new — because we can’t keep up with orders and purchases on our own (which is a good thing, when you think about it)
SAVE – A portion of every payment that comes in. Decide how much we want to be saved. It could be 5%, it could be 10%. But something needs to be save for the general rainy — no customer, no client producing– days.
SPEND – When the equipment we’re working with isn’t working. It takes more than us to run a business, no matter how big and bad we think we are. That could be our all-purpose copier/ printer/fax machine, it could be a laptop, it be a new accounting system. Spending on the right equipment could save us having to spend much more later. It’s an investment, not a waste. Remember that.
SAVE – When customers and payments are abundant. Sometimes this is when business owners begin to do another big round of spending because they have the money. And that’s alright as long as they remember to save too.
SPEND – When you need important and legal advice or information. The last thing any of us want is to be caught up in a lawsuit because we weren’t prepared or knowledgeable about the perils of our business. If you’re seeking a business attorney, ask who offers free consultation. And before committing or signing any agreement, understand the value you’re getting in return.
SAVE – When you can do it yourself. There is a too much free information (whether it’s right or wrong, is debatable) out there for us to always spend on seeking someone’s paid help. If you’re capable and have time (or can make time), do it yourself. At least, in the beginning. If you know way around building a website, build one yourself. Then when you need an online face lift, seek out someone more professional.
I know, it’s nice to be in the black instead of the red, but as long we remember we’re making investments into our company, we don’t have to worry that we’re throwing our money away. We’ll be spending and saving the right way.