It seems like common sense to save money when you run a company, but I am always shocked when I walk into a fellow internet company’s office and see solid hardwood desks, Aeron chairs, brand new computers with 24′ LCD’s, plasma TV’s hanging on the walls displaying nothing more then company slogans, and more art on the walls than most small museums. After five minutes walking around I start to wonder does anyone make money around here or do they just spend it.
What amazes me even more is that many of these companies run off of VC funding. If I was an investor in a VC and found out one of my companies was buying $1000 chairs and stocking the kitchen with 20 cases of Red Bull and organic food, I would be in that CEO’s office so fast his head would spin.
My partner, Lev, and I have gotten by very frugally from day one. We started off by working out of his basement off of three grey plastic folding tables we purchased at Home Depot. We used the family internet connection and ran an Ethernet cable out the bedroom window on the second floor down in through a basement window and down into a router I picked up from a local used computer store. He ran a food cart business on the side serving the Ohio State University area and stocked everything in his basement. So, lunches consisted of walking over to the corner of the room, opening a box of potato chips and Kit Kats and subsisting off of that. We did $252,000 in revenue the first year in business and the only reason we turned a profit was because of how frugal we were.
Now we aren’t working out of a basement anymore obviously. We occupy about 8,000 sq ft of office space combined between our Columbus and Chicago offices and employ nearly 45 people. However, in many ways we are still as frugal as we were then and that is certainly one of the biggest factors in our success and survival for that matter. We believe in putting all available funds into paying our people and building our services. That’s where the money should go. If I asked one of our employees, “Would you rather have a solid mahogany desk or a larger paycheck?” Take a wild guess what their answer is going to be.
Now, offices are certainly not the only place that companies waste money. However, the mentality that drove us to keep our office expenses low overflows into many of the other services we pay for. We are always analyzing the services we pay for and figuring out whether or not we can do it in-house ourselves or if we can find a better but cheaper alternative with a different company. If we pay $5.00 for something, we demand to know why we can’t pay $4.50 for it and we will search out alternatives.
In my eyes companies serve only 3 purposes:
1. Delivering the best product possible for the client and insuring their 100% satisfaction.
2. Support your employees and their families as much as possible and your surrounding community as an extension of that.
3. Generate profit. I could care less when I hear a big revenue number. I only want to know how much you actually make.
I’m sorry, but I don’t see art, over priced outsourced services, Aeron chairs, and $2000 desks having anything to do with 1-3.
Keep it frugal and your business stands the best chances possible to maintain profitability and grow.
Categories: Business Lessons
Tagged: advice, business, business advice, business tips, ceo, cheap, costs, frugal, low, president, saving money, start up, startup
This is the first part of a series of posts I will be doing to talk about my experiences with InsuranceAgents.com and watching it grow from a 3 person start-up to the successful 40+ person company it is today.
My style of management is far from ideal. I have certainly made a ton of mistakes and my entire life with this company has been a giant learning experience from day one through now. However, my partner Lev and I can see several critical aspects of how we have managed day to day operations that helped the company succeed.
The first thing that came to mind when I thought about why Cyber Technology has functioned even through the toughest of times, was our ability to always be candid with each other.
Cyber Technology started off in a basement and grew by hiring young aggressive college students who had a desire to be part of the start-up environment. This translated into a rather atypical business environment where bureaucratic management techniques didn’t exist. You could throw all of your business management books out the window, since none of the principles were in place with us.
What we had instead was an environment where we felt like more of a group of friends that happened to work together. Rather than teams of employees chasing paychecks and hoping for promotions like many companies. The result, to this day, is an environment that blurs the lines between executives, managers, sales, marketing, customer support, full-timers, part-timers, etc… While there is an informal chain of command, people feel comfortable being candid and open with each other without worrying about repercussions.
Beyond this, candid also means being open to all viewpoints. While it can be uncomfortable sometimes, our company culture has always encouraged people to not “candy coat” their opinions and to be frank and honest with how they are feeling. This may sound crazy to many managers or executives out there, but an employee can approach Lev or I and tell us that they are not happy with our job performance and our reaction will simply be to have them explain why they feel that way. From previous jobs I have had, I would cringe at the thought of how awful it would be to tell one of my bosses what I truly thought of them. Looking back I certainly would have been fired or had my hours cut for doing something like that. However, I feel its critical that employees be able to communicate as honestly as possible with managers.
Being candid must also apply from the top down as well. I think employees deserve to know the state of the company in real world terms, not watered down business jargon. Telling everyone the company is “proceeding along a path of sustained growth with new opportunities on the horizon” is the same thing as saying “the management doesn’t care at all about your opinion, so we are going to give you bland business jargon that contains no useful information for you”. Management must communicate in terms everyone can understand and relate to, so everyone can be on the same page. Having all the knowledge of the business operations held in the hands of a few while everyone else is kept in the dark is a recipe for disaster. Just look to companies like Amazon or Zappos to see how well open communication works and look to companies like Enron to see what happens when people share nothing with each other, kill dissent and open communication, and management holds all the information solely for themselves.
At the end of the day, all that really matters in a company is communication. Nothing can get done when people don’t communicate to each other. However, nothing great can be achieved when people aren’t candid when they communicate.
Categories: Business Lessons
Tagged: business, startup, business advice, candid, communication, employees, management, executives, honest, open, chain of command
For some reason beyond me, people seem to ask my opinion of the economy a lot. The only reason I can possibly come up is that I work with sites like DebtSolutions.com and in the past DebtHelp.com.
While building these sites, yes its true that I have had to stick my nose in nearly every aspect of financial news. I also trade currencies on the Forex, so my life has revolved around intentional monetary policy decisions and reports for a couple years now. Between that and living on sites like Bloomberg, Forbes, FT.com, NYTimes business section, and Reddit.com’s economy section… I would say I have kept up on financial matters on an hourly basis for about 2.5 years now.
However, I think its critical before I go on that I give a disclaimer here. Just because I read other people’s opinions on global economics, doesn’t mean I have the slightest clue what I am talking about. I’m not the one writing the stories on Bloomberg, I simply read them. I’m discouraged to see so many “couch” economists spouting their theories on how this economic crisis is going to turn out, when they have no basis, no education, and no frame of reference to do so. So, unlike them I’m going to clearly state right now that you shouldn’t take anything I say seriously and I highly recommend going to sources like Krugman and others who are far more qualified. Think of everything I say as a lie until proven otherwise and certainly fact check anything you read here. Keep reading →
Categories: General Business
Tagged: bailouts, business, business news, consumers, credit cards, currency, deflation, economics, economy, federal government, forex, gas, homes, housing, inflation, oil, opinion, prediction, prices, realty, saving, spending, us economy
Running a small business is difficult enough as it is, without adding in tax strategy on top of every other list of worries. Needless to say a company like mine has limited resources to setup complex tax avoidance or evasion techniques like many Fortune 100 companies do.
So, my company pays its fair share and I enjoy the benefits of these taxes such as roads, bridges, public transportation, public schools, clean air, clean water, waste removal, sewage systems, police, fire departments, EMT’s, college financial aid, medicare, national defense, and 100’s of other services. Apparently Coca-Cola, Intel, Seagate, Oracle, Noble Oil, and tons of others don’t feel they need to contribute to any of these services that they love to enjoy.
The idea of companies, especially brands dear to tens of millions of Americans like Coca-Cola, avoiding taxes by moving their HQ to places like the Cayman Islands, its just disgusting. I can’t believe companies that try to tie their brands so closely to the American way of life and refer to themselves as great US companies, in the back room when no one is looking, move their HQ to other countries to avoid their share of business taxes.
I can understand tax strategy designed to save the company money. I can understand making sure you and your accountants optimize deductions, depreciation, etc.. to save money. I however, cannot understand switching your official HQ to the Ugland House in Grand Cayman to avoid paying US business taxes to the tune of as much as $190 billion a year in lost tax revenue for the government. That should be tax evasion and I’m glad this administration is moving to close this loophole that I know many of us can’t believe even exists in the first place.
Categories: General Business
Tagged: cayman islands, coca-cola, government, grand cayman, intel, obama, oracle, seagate, tax, tax avoidance, tax evasion, tax strategy, taxes, ugland house
