The following post is a guest post by Pardeep Goyal, an entrepreneur.
I started working on my first startup in 2013 and resigned from my job last year to work full time on my startup. I failed at two startups before founding CashOverflow, my current startup & personal finance blog.
I wasted a lot of money in my first startup and as a result, learned some valuable lessons about saving money.
#1. Don’t keep your money idle in current account
You probably know that you earn 4% interest on a savings account but 0% interest on a current account. There is no benefit in keeping money idle in the current account. We incorporated our company with 10L capital and were losing more than Rs 3000 every month in interest.
Tip: Keep only one month’s expenses and some reserve in the current account and transfer the rest of the amount to a good liquid fund that fetches you a higher return.
#2. Save on rent
You might not need an office from day one of the company’s creation. We made the not so smart decision of getting office space even before hiring the team. We thought that people will join us by looking at our office, but we got the initial team member from our network. We ended up wasting Rs. 15,000 per month.
Tip: Work from home, residential apartment, or co-working space.
#3. Buy used stuff
We bought new furniture, air conditioner, refrigerator, and inverter for our office. We had to sell everything at half the cost when we shut down our business. If we would have bought used stuff, then our loss would have been lower.
Tip: Find used computers, furniture & electronics on classifieds websites.
# 4. Save on web hosting
You will normally get low traffic to your website in the initial days of your startup. You don’t need to buy dedicated servers or costly hosting for your website or blog. We were lucky to get selected in NASSCOM 10K-Startups, and they helped us save money on hosting.
Tip: Use shared hosting. When you scale up, get free hosting for 1-2 years as startup benefits from AWS, Google, Microsoft, or RackSpace.
# 5. Don’t hire too early
You will lose a lot of money if you hire an employee but have insufficient work for him. You are not a big IT company with extra workforce needs. Startups should save every rupee to extend their financial lifeline.
Tip: Hire when your team can not handle the current work. Hiring Interns can be a good strategy.
#6. Save on advertising
Smart startups figure out ways to do free marketing. One useful marketing hack is to use content marketing. Here is a three step process to get you started
- Create content (articles, emails, social posts)
- Distribute content using marketing channels (Social media, press coverage, SEO)
- Analyze and improve your content marketing efforts
Tip: Use free marketing tools to find out how you can optimize your marketing efforts. – Here is a list to help you out.
#7. Outsource HR/Legal/Payroll
A startup’s success can be attributed to 3 key areas: product development, marketing, and sales. You can outsource everything else, but some startups do the opposite. Early stage startups generally can’t afford full-time accountants, lawyers or human resource managers and neither do they have time to handle these roles themselves.
Tip: Use automated tools in the initial days and slowly outsource non-core work as you grow.
# 8. Meet your clients over coffee (not lunch)
Only a startup veteran can tell you how much money he has to spend on meetings. You have to meet your customers, partners, and potential employees. In most of the cases, you meet them outside and have to pay the resulting food and drinks bills. You have to choose between Rs. 200-300 bills for coffee or Rs. 1000-1200 for lunch.
Tip: Take out your client for lunch/dinner only after they have paid for your services.
What I would like to leave you with
When you inculcate the habit of saving, you apply it everywhere in your life. Not only have I learned some lessons from my own experiences, but I also learnt a few from other’s experience.
Pardeep is an entrepreneur, freelance writer and marketer. He co-founded two education startups before founding CashOverflow. He also loves to help startups.