I like to read (auto) biographies of successful people. I think it is an excellent way to learn & be inspired. And I notice something common in many business persons who made it big – Sam Walton, Warren Buffet and many more.
They lead a frugal, simple & happy life.
If you are the kind of person who takes inspiration from books, I suggest reading Made in America by Sam Walton. Sam Walton founded Wal-Mart, the largest retail organization in world and went on to became richest in America. But do you know how they lived? A simple, happy and meaningful life with out luxuries or lavish expenditures. I bought the book in 2nd hand market few weeks ago and have been reading it few chapters every day since. Lovely read.
In fact, one of my favorite books Millionaire next door is full of such examples of small business owners, successful professionals who live a simple & happy life.
Why frugality is important for successful business?
The basic equation of business is,
Profit = Revenues – Expenses.
It does not take a genius to figure out that if your business makes $100 in sales, then you got to spend less than that to turn a profit.
How do you spend less than what you earn? By being frugal of course. It is a surprise that most startups focus obsessively on acquiring funding (ie increasing expenses thru more interest, dividends etc.) than finding ways to cut expenses.
Not only being frugal helps you turn profitable quickly, but once you run a profitable business, you can easily get funding or investors.
By being frugal, you will be able to pass on the benefit to your customers, thus making your products valuable.
And by being frugal, you consume less, thus making earth a happy place.
How to be frugal
Observe frugality in all aspects
The first principle of frugality is you cannot be lavish in your personal life and frugal in business. It does not work like that. You have to believe it, observe it in all aspects of your life.
Hire people with frugal mindset
It is not enough if the founders practice thrift. If you hire people who are used to living lavish life, then you are back to square one. Make sure you hire people who are simple, who consume less and live happy life. It might take a while to know all these aspects when you are hiring someone, but you should invest time to know your team.
Keep things simple
You will end up spending a lot of money if you have a complex process behind everything in your business. By keeping things simple, you can cut expenses drastically and make more profits. Few examples of keeping things simple:
- Give power to your employees and trust them. Let them make decisions to keep customers happy.
- Trust your customers. When they ask for a refund or have a service request, just do it rather than subjecting them to extra verification steps.
- Say sorry when you mess up. And learn from your mistakes. It is much simpler than finding someone to blame or defending your position.
Think of money as means, not goal
When you consider money as a tool to achieve something else, you will respect it more.Frugality does not mean amassing wealth or being cheap. It means being extremely wise with money and using it with utmost care. The moment someone thinks of money as end result, they are lost. For a smart business person, money means:
- Ability to create products that their customers love
- Ability to reward their employees & partners for all hard work
- Ability to buy time (thru outsourcing, hiring etc.) for self
- Ability to contribute to society (a la Bill Gates, Buffet)
- Ability to say no to poor decisions & in-correct practices
De-link Happiness from Money
Most people when asked Why they spend so much, they simply say “to be happy of course”. Contrary to what we think, our happiness is not linked to how much we spend or what we buy.
While we can all agree that a starving person need to buy a meal to be happy, we can safely say that marginal returns of additional spending always diminish.
So how to de-link happiness from money?
Simple, develop a strong understanding of yourself and what makes you laugh, cry, content & sleep tight. Most often these things are not linked to how much money we spend.
For example, my happiness stems from,
- Laughing many times everyday
- Spending time (a lot of it) with my wife, kids
- Talking & sharing opinions with my friends & relatives
- Learning new things
- Sharing new ideas & techniques with world (thru my blog, classes etc.)
- Providing excellent value for money to my customers and hearing from them how they became awesome using what we sell.
- Performing random acts of kindness
- Doing occasional DIY fixing or creating something
- Working out
- Reading books, widening my mental vocabulary
- Challenging my self with a difficult problem and solving it convincingly
- Surprising near and dear ones
- Taking a nap
- Having a freshly brewed coffee or tea with my wife
- Cooking (a variety of pizzas and pastas)
- Eating ice cream
- Visiting new places & exploring
As you can see a majority of what gives me happiness has no linkage to money
Are you & your company frugal?
Go ahead and share with me how you run your family & business? Are you able to turn profit every month? If not, time for you to rejig the expenses and discard the items that are pulling you down.
I wish you a frugal, simple & happy life.