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Tuesday, November 2

Starting a Business - How a Frugal Miser Does It

Last week my business partner Chris and I had a conversation. He is concerned about my Type A personality and how it will affect our business. That got me thinking about a lot of things.

There's a time to frugal, and a time not to be.

In my personal life, I go out of my way to keep my expenses low, low, low. I mean, how many people do you know that unplug their refrigerator and freezer when they go out of town to save electricity? In business, there are some costs that can be minimized and others that can't.
  1. If the expense doesn't contribute to our core focus, it can be cut. For example, I have to figure out how we will be doing payroll. I plan to choose the absolute best value package. That doesn't necessarily mean the cheapest package. What it does mean is I'll be driving the Chevy, not the Cadillac.
  2. For costs that can help us increase our revenues, I'll make the necessary investment. For example, happy employees will treat customers better. I'm not looking to cut costs by treating my employees like they can be replaced at any time. I plan to pay my employees a fair wage, and incentivize them with spot bonuses when they do a great job, and quarterly bonuses when the company does well, among other things.
  3. Another cost I'm not looking to cut is quality. Our product will be the best it can be - no shortcuts.
So how does a frugal miser cut costs? I have several ideas. We will turn the thermostat completely off when we leave every day. No reason to heat or cool an empty space. Also, we will be very selective about advertising. Often times I wonder just how effective some mediums of advertising can be. I imagine ambulance-chasing lawyers do well by advertising during daytime courtroom dramas. The tort-heavy/trigger happy demographic they seek is the audience that is at home during the daytime watching TV while everyone else is out working. But a dentist advertising on a highway billboard? Every time I drive by that ad I wonder how many new patients it takes to pay for it. Then I wonder why the dentist isn't getting new patients the way most dentists do: through referrals (which, as a side benefit, doesn't cost much more than the cost of treating your customers right to begin with).

Being a frugal miser means cutting out all the fat. You never slice into the muscle - that would hurt!

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