When you’re just getting started in business, the importance of conserving capital is obvious. You don’t have a lot of it to begin with, you’re not earning much of it in the early going, and you have startup cost after overhead expense after growth investment to worry about. If you’re not careful with your cash, you won’t make it very far.
The picture changes once you’re in charge of a self-sustaining enterprise. As revenue increases and market share grows, so too does the temptation to loosen the belt a bit. You don’t feel like you have to watch every dollar, and technically speaking, you don’t.
But you should. Entrepreneurs who maintain that scarcity mindset even after their businesses leave the startup dead zone do better over time. So do their employees, investors, and customers. You owe it to everyone who relies on your business to ensure its long-term success by stretching its still-precious dollars further.
Here’s how to make that happen.
1. Bootstrap Until You Can’t Any Longer
Every external funding dollar you expect has a tiny little string attached to it.
You can’t see these strings, of course. But you’ll feel their collective pull soon enough. By then, you can only hope they’re not pulling you under.
2. Keep a Steady Strategy in Good Times and Bad
By all means, adjust your tactics to market conditions. But just as you wouldn’t allow the person sitting across the table to hold your strategy hostage, you shouldn’t allow Fed policy or the Consumer Confidence Index to dictate your position.
Successful dealmakers certainly don’t.
“Our strategy doesn’t change between an up market and a down market,” says Andrew Nikou, founder of OpenGate Capital, a global private equity firm. OpenGate made its first moves at the height of the Global Financial Crisis, the very definition of a down market; Nikou credits the experience for seasoning his team and preparing the firm for downturns to come.
3. Always Be Prepared to Negotiate
Nearly everything is negotiable. You just have to know how to ask.
Office rent too high? See below, but talk to your landlord first.
Paper products supplier jacking up prices faster than they should? A well-placed threat to take your business elsewhere might solve that problem. Ditto for your business Internet provider, your tax preparer, your business attorney.
Yes, even your business attorney.
Again: You’ll never know if you don’t ask.
4. Do Business Remotely or in Flexspace Unless You Really Can’t
Most low-headcount professional services providers don’t need to office out of dedicated suites. At worst, they need a few desks’ worth of flexspace; remote for the rest.
Sure, some clients want to meet face to face, and nothing says “success” like an office someone can walk into (rather than a sketchy virtual office or anonymous P.O. box). But the vast majority of clients will be fine meeting in a coworking space, a coffee shop, or a restaurant.
5. Use Contract Labor Whenever Possible, But Don’t Over-Rely on It (Or Cut Corners Quality-Wise)
If you can get the job done just as well with a contractor, don’t waste it on an employee. And if you can get enough of the same sort of job done with the same contractor or contracting firm, hire them instead of a traditional employee. In a global market for talent, you’re almost certain to come out ahead on labor this way.
Just know when contractors won’t cut it. Payment for subpar work turns from an investment to a liability when you need to bring in another set of hands to do it again.
6. Squeeze More Value Out of Your Own Labor (And Other Partners’)
Think of this as “sweat equity” in your business. Every job you take on yourself in the early going is a job you won’t have to pay someone else to do.
Treat Your Dollars With Respect
Every dollar your business earns is a gift. It doesn’t matter whether it’s the first or the ten millionth. The customer who parted with it had a choice in what to do with it, and they chose to reward your efforts.
That’s how you should see it, anyway. Because your customers really do have a choice. And for any number of reasons, any number of them could choose to cease doing business with you tomorrow.
Or not to begin doing business with you in the first place.
Even if business is humming along nicely, you need to be prepared for circumstances to change. Treating every dollar like it’s a gift — with the respect it deserves — might not make the bad times any less painful. But it could make the difference between success and failure.