How I keep my startup expenses low

How I keep my startup expenses low [Part 1 of 4]

by Chandoo on August 24, 2010 · 4 comments

in Money Matters

As a startup owner, my first and foremost goal is to keep expenses ridiculously low. At the same time I have conflicting goals like,

  • Give insanely awesome customer service
  • Design fantastic products

But I found a decent balance between these goals and today I want to share some of the tactics I use to keep my business expenses low.

This post is unusually large, so I am going to write it in 4 parts.

  1. How I lower my Rental & Salary Expenses
  2. How I lower my Marketing & Sales Expenses
  3. How I lower my Website Expenses
  4. How I lower my Other Operational Expenses [Hardware, Software, Misc.]

Rental Expenses

I said it earlier too. I run my company from our bedroom. It is cheap, convenient and gives me tons of freedom to work and relax as I want. But it may not work for everyone. Especially if you are planning to hire some help.

My next best suggestion to move to a low cost location and set up your company there. Living in big cities can be a fancy thing. For eg. I was tempted to base my company in either Bangalore (India’s silicon valley) or Hyderabad (equally good city for tech. companies). But I decided to run it from Vizag. Running your company from a small town has various advantages:

  • Rents and other living expenses are cheap, which means, you can last longer in a small city with the same seed money.
  • Temptations are low: In a small city, you have few venues to splurge or indulge in time wasting activities. The more money and time you have, the better it is for your start-up.

Of course, starting in a small city may not work if your business involves either selling physical goods or need a big network to run, both of which can be found abundantly in big metros like Bangalore or San Fransico.

How much I spend on Rental:

We live in the outskirts of a small town in India. So the rents are not that expensive. We pay roughly Rs. 3000 ($75) per month as rent.

Resources on best city to start a business:

If you are in India, consider starting your company in Coimbattore, Vizag, Mangalore, Mysore, Trichy, Chandigarh, Indore, Bhopal, Pune, Kolkata, Bhubaneswar, Cochin, Jaipur. All these cities are low cost (compared to metros) and provide excellent opportunities for expansion, infrastructure and peaceful living.

If you are in USA, read this post by Penelope Trunk explaining how to choose a low cost city for living.

Salaries

I once read somewhere,

The best time to hire an employee is when you couldnt do that work yourself anymore

I couldn’t agree anymore with that. I have zero employees in my company (other than me). I occasionally hire free-lancers to take care of various odd jobs I have, but I have no employees. That means, I have no salary expenses recurring every month.

If you absolutely must hire someone, consider the following options to keep costs low,

Hire Freelancers:

Freelancers are a great way to get something done quickly. Try to hire someone from your local community as it feels good for both. One disadvantage of hiring freelancers is that you need to hand-hold them during initial few weeks to get best results. Typical rates for a freelancer could be between $50 to $250 per hour.

Outsource:

If you have a regular activity that is easy to do, but time consuming, then outsourcing your best option. You can find good help either in your own country or elsewhere around the globe for reasonable price. You can hire a good employee thru outsourcing for somewhere between $500 – $2000 per month.

Take help from Friends:

Use your personal contacts from earlier work places and college to get some help on say coding, web site set up or marketing. Since they already have experience in that area, you are bound to get quality output from them within reasonable time.

I have hired freelancers as well as took help from friends to keep my business going.

Tell me how you keep expenses low:

Please share your experiences on lowering expenses using comments. I would love to know what tricks and tactics you use.

What next?

In the next installment, learn how I keep my marketing & sales expenses low.

Related Posts: How much does it cost to run a website?

Image credit: Photo by HLIT

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