Entrepreneurs Share Their Money Saving Tips
Source: http://www.bloomberg.com/money-gallery/2011-09-14/entrepreneurs-money-saving-tips.html
Smart Ways to Cut Costs
Bloomberg.com asked notable entrepreneurs, including panelists at Bloomberg Link’s 2011 Empowered Entrepreneur conference in New York, what they do in their professional or personal lives to cut costs. After all, new businesses bleed cash. Entrepreneurs have to get creative at cutting corners by necessity.
Click ahead to learn how these cash connoisseurs save money with tactics ranging from strategic schmoozing to scooping up space from recently failed businesses. Oh, and one novel strategy from mogul Felix Dennis: how to save millions (yes, millions) on birthday gifts and parties.
Ali Wing, Giggle
Ali Wing, founder of baby retail chain Giggle, spends about 40 percent more than needed to open a new store by not reusing existing lighting, heating, and air conditioning systems. The new, energy-efficient systems pay for themselves in two years, says Wing.
“Less is not always less,” she says. “I’ll buy a better product I expect to last longer and do more things for me.” For example, rather than decorate her infant son’s room with traditional baby furniture, which would have to be replaced after a year or two, she bought more expensive, adaptable, industrial-style furniture. At age 8, her son still loves the room’s design.
Howard Lindzon, StockTwits
Howard Lindzon, chief executive officer of social investing site StockTwits, took radical steps to cut costs a few years ago. He and his wife sold their house in Phoenix and moved to Coronado, an island community off San Diego. Rather than buy a house, they found it much cheaper to rent. Because public schools were better in Coronado, Lindzon could stop paying private school tuition for his kids. The Lindzons also became a one-car family.
The downsizing came after Lindzon created a “financial statement” for his household. After seeing where the money goes, he says, “you have to be honest about what you’re willing to give up.” Despite all the cost cutting, his family still dines out frequently.
Dina Kaplan, blip.tv
Schmoozing has saved Dina Kaplan a lot of money. Kaplan, who co-founded blip.tv, an online platform for creators of independent Web shows, is based in New York, but she and her staff found themselves spending a lot of time in Los Angeles. She spent four months building friendship with the management of a hotel close to blip.tv’s LA office. Now she and her employees stay there 100 nights a year at an “unbelievably low rate,” she says. “It becomes your home away from home.”
Kaplan takes advantage of incentives for loyalty in other ways, too. Her company uses a single credit card–the American Express Starwood Preferred Guest card–for as many purchases as possible. By building up reward points, she says, “you’re able to stay in incredible hotels for free if you’re charging enough things.”
Chris Larsen, Prosper
When Chris Larsen co-founded Prosper, the peer-to-peer lending marketplace, he went out hunting for office space rendered available by the recent failure of some other venture. When he found a space, signed a lease, and moved in, Larsen spared his landlord the cost of clearing it out. “You never need to pay for furniture these days,” he jokes.
Prosper inherited everything else in the office, too: filing cabinets, pens, pads of paper, and even leftover coffee in the kitchen. One result–aside from considerable cost savings–is an “eclectic” design scheme, says Larsen, now Prosper’s chief executive officer. “Your conference room looks funky because you have six different types of chairs,” he says.
Paige Craig, BetterWorks
When starting companies, serial entrepreneur Paige Craig gives new employees equity but also tries to get them to take a 50 percent salary cut–at least initially. First, it “saves you a lot of money,” says Craig, co-founder and chief executive officer of BetterWorks, a platform for companies to manage employee perks. BetterWorks, which started up in 2010, has 21 employees and a labor budget of less than $100,000 per month, Craig says. “Second, you’ll know everyone who is working for you genuinely believes in what you’re doing.”
“When the company’s a success, the reverse is true,” he says. “You want to keep your core team and overcompensate them.” Rather than hiring expensive, outside talent, he says, “invest that money in your existing talent and promote them upward.”
Christine Elia, Closet Couture
Interns produce much of the content on Closet Couture, the fashion site founded by Christine Elia. Her interns are paid only stipends, but Elia, the company’s chief executive officer, says she tries hard to make the jobs worth their while. For example, internships include such perks as attendance at exclusive New York Fashion Week events.
“You can get exceptional talent if you’re offering something pretty sexy,” Elia says. “It’s not just me taking advantage of them,” she says. “I make sure there is something special and unique that [bolsters] their resumes.”
Felix Dennis
Dennis, publisher of The Week and creator of Maxim, grew up poor. Thanks to his success in publishing, he says he’s “spent like a drunken sailor for most of my life.” He writes in an e- mail: “The best decision I made, which I harp on about in my book, The Narrow Road, was to refrain from buying certain high-ticket items which cost a small fortune to maintain, even as they deteriorate in value.” If it flies or floats, Dennis rents it. “It’s cheaper in the long run. When I fancy a month cruising on a mega-yacht, I just rent one. It’s the same with private jets.”
A key economy, says Dennis, comes from his approach to birthdays: “while I’ve always been an open-handed chap as far as friends, family, and lovers are concerned, I made a decision in my twenties never to celebrate (or even acknowledge) birthdays–my own or anyone else’s. I estimate this has saved me around $5 million over the past 40 years.”
Catherine Levene, Artspace.com
When Catherine Levene co-founded Artspace.com last November, she and her team “camped out in the office of another company,” paying a “very small” amount of rent while avoiding costs like security deposits.
Levene, the company’s chief executive officer, says she didn’t have a budget for recruiters while starting the marketplace for contemporary art. “So we spent hours and hours working our own networks.” Most effective, she found, were social media sites such as LinkedIn and Facebook.
She also saved by using software developed for young companies, covering everything from e-mail to project management. With so many options, many of them inexpensive–and some even free–Levene says: “In the early days of a company you don’t need to build everything.”
Nicolas Perkin, the Receivables Exchange
Nicolas Perkin is a “born-and-raised New Yorker” who has lived in California and Europe. Four years ago, he decided to start a company in what was, for him, an unlikely location: New Orleans. “The world is really connected these days. You can pretty much choose where you want to start your business,” says Perkin, co-founder and president of the Receivables Exchange, which allows small and midsized businesses to raise money by selling their accounts receivable to investors.
New Orleans has a big advantage, beyond the jazz and beignets: It’s inexpensive. Hotels are cheaper, it’s still easy to travel to the west or east coasts, and many employees have large, cheap apartments close to the office, he says. “I definitely feel like my quality of life has improved.”
Alexa von Tobel, LearnVest
In 2009, when Alexa von Tobel founded LearnVest, a financial information site aimed at women, she tried to be frugal and “scrappy” in every imaginable way. She initially worked out of her home and Starbucks, using mobile phones rather than paying for a phone line.
Presentations to potential investors weren’t printed in color, which she says was too expensive: “No one cares.” For technological needs such as e-mail, giving online surveys, and managing content, LearnVest used such free options as Google’s gmail for as long as possible. Von Tobel also worked out a deal to obtain $10,000 in free services from a lawyer before the company had to start paying.
One area in which von Tobel didn’t stint: Taking people out for coffee to glean insights. “There’s nothing more valuable than smart friends and advisers,” she says.
Sergio Fernandez de Cordova, Fuel Outdoor
The recession slammed Fuel Outdoor’s billboard business. Sergio Fernandez de Cordova, a company founder, says an industry that had been growing by 8 percent annually suddenly contracted 15 percent. “We did big cost-cutting,” he says. Fuel Outdoor fired staff, but made it clear there would be only one round of job cuts. He told the surviving staff: “It’s better to keep the ship afloat and overwork for a little bit.”
The company found ways to reduce legal fees while slashing travel costs, which were high because Fuel Outdoor has six offices that serve nine markets. “I used to travel once or twice a week,” de Cordova says. “Now I’m traveling maybe once or twice a month.” He and other employees use videoconferencing and hold a greater number of meetings on each trip.
Ben Lerer, Thrillist.com
“I do a very poor job of saving in my personal life,” Ben Lerer admits. In his role as co-founder and chief executive officer of Thrillist.com, a lifestyle publication aimed at men, Lerer says he’s been far more careful with money.
One reason is Thrillist.com initially ran on Lerer’s personal credit card, making him “more aware of how the company spends money,” he says. Monthly bills could hit $75,000. Until recently, Lerer says he “micromanaged” spending, trying to create a frugal culture by restraining fixed costs, such as rent and computer purchases.
An extreme economy he now regrets was choosing not to buy an expensive phone for a conference room, thereby forcing employees to use the speaker functions on their own mobile phones. It was difficult to hear anything, so employees stopped using the room. “We used to cheap-out and delay the inevitable,” he says.
S. Coppy Holzman, charitybuzz
S. Coppy Holzman, who calls himself a “serial entrepreneur,” spends a lot of time setting up each new company’s policies and procedures because he feels that everything a business does–from shipping merchandise to buying supplies and arranging travel–should follow an efficient process from the very beginning. “It’s much better to take longer and think through the solutions,” he says–and even better when you can use software to automate them.
Holzman is now chief executive officer and co-founder of charitybuzz, an online charity-auction site. His goal is to create a corporate culture in which “you’re naturally frugal, but do things right.”
