This is an influencer post by Jason Calacanis, Entrepreneur & Angel Investor
Years ago I wrote a blog post on how to save money running your startup, and it was one of the most popular things I’ve ever written.
I thought I would take a second stab at this — without reading my original piece from 7 years ago — as an experiment in how much has changed.
- Outsource your HR/payroll to a company like Zenefits & ZenPayroll. Previously, I used TriNet and other PEOs, but those startups charged a whopping $100+ per month per employee. That’s like $1,400 per year per person. If you have 10 folks that’s $14,000 per year and it’s crazy. These new services charge fixed fees, not these absurd monthly fees.
- Keep computers cheap by offering folks $500-1k credit toward the computer of their choice — that they own — provided they stay at the company for two years. So, instead of buying everyone $2,500 MacBook Pros (absurdly expensive), just give folks $500 to $1,000 toward buying one they own, if they want. Folks like owning their own gear and it’s free money for them.
- Don’t sign a lease until you are at over 20 employees. $500-600 per desk coworking spaces are so much better overall because you have no hidden costs of buildout, buying desks, security, coffee, and cleaning. When you put all those costs together it makes ZERO sense to waste three months trying to find a space and negotiate with these [email protected]#@% landlords (and they are complete [email protected]#$%$%ing [email protected]#$#@s more than half the time).
- Negotiate flat rate and deferred fees with your attorney. The great firms and attorneys invest in startups and do this for me and others all the time (WSGR and Scott Walker are two long-term partners of mine who control costs — especially in those early days).
- Buy a cheap domain and “fake it ‘til you make it.” I know folks are going to say, “Aren’t you the Inside.com, Mahalo.com, and 20.com guy who buys expensive domains?!” Well, I bought those domains for $60k, $14k, and $70k — I got sick deals on them. I would not have bought 20.com for the $1.2m I recently got offered for it, but I would have paid $1m for Inside.com, actually. Instead, get a domain name like “getinside.com” or “insideapp.com” or “inside.co” — or something like that — until you can afford the actual .com (if ever!). Times have changed.
- Hire part-time and contract designers for cash and stock. I’ve seen a bunch of designers — high-end ones — take $5,000 in cash and $15,000 in stock (at your next valuation) for their work. Great designers pick projects based on their passion, not the paycheck — and the savvy ones understand the value of stock options!
- Hire part-time folks where you can, but get them for what their full-time salary would be. I see folks come to me all the time and say, “We’re going to pay these consultants $200 an hour for 10 hours per week.” I’m like, “How much would they charge as an employee?” And they say “$100,000 per year” — to which I say, “Well why don’t we pay them $50?” The answer? “They’re consultants!” Well, if you talk it through with the consultant you’ll find that s/he plays ball if your project is cool — and you are too! Just say “Hey, I don’t want to put you out, but can you support us now and grow with us and take $50 an hour so we can see if this company is even viable? If it is, we might be able to hire you full time!”
- Do not hire a PR firm. If you need press then figure out who the top five journalists are in your space and send them a personal email: “Hey Jason, I loved your story about ‘saving money on a startup.’ Our company has an amazing solution to saving money on cloud computing. I’ve attached our one-pager and I’d love to tell you more. Best, Jane Doe.” The CEO-to-targeted-journalist approach works really well.
- Do not spend money on desks, chairs, and anything that doesn’t have to do with the product until you have to.
- You can hire folks at rate X, but tell them that you can only pay them 80% of X for the first six months or until you raise your A round. Folks can feel free to take this offer or not. If you are at a startup you shouldn’t be cash-driven anyway, so challenging the cash assumption is fine (you will lose this battle sometimes, of course; especially when you try and hire a Yahoo exec with three kids in private school and who goes to Hawaii for three weeks over Christmas — but you probably don’t want a $200-300k Yahoo exec at your startup anyway!).
- Ask your early clients to pay you one year in advance for your work. Many will say yes! Heck, if one in five says yes, that’s amazing! The way you close this deal is by saying, “If you pay us one year in advance, we will be extra attentive to your firm and do a lot of custom training and support for your team as a thank you!”
- Get Rackspace, AWS, and Google Cloud to give you free server space for a year or two. They all have programs like this, and if you get to know the reps at those places they can get you even more.
- Keep your meetings to coffees, do not do drinks, dinners, or lunches — unless they are clients who have spent money with you. Those take a lot of time and cost 20-30x more to do!
- Use “drip campaigns” (low-cost client acquisition) and content marketing to make a name for your company. I need to detail those in their own posts — someone remind me.
Disclaimer: This is an Influencer post. The statements, opinions and data contained in these publications are solely those of the individual authors and contributors and not of knowstartup and the editor(s). This article was initially published here.