Ask HN: If you started over with your business how would you save money?
I started a venture not so long ago and it's progressing in ways that I didn't think were possible this early on. We're bootstrapping it and there's no income yet but we're really close. Closer than I've ever been with something that is my original initiative/idea. Luckily, I've found a solid co-founder that believes in the idea as much as I do and has helped a ton. This was not an easy decision to make as a hard-headed engineer that prefers to go at problems on his own, but it was extremely worth it.
I'm on a journey to work through personal problems that have hindered me in the past, like being stingy/cheap, preferring to work alone, etc.., because I think that's what's going to bring us success. In this journey, however, I still have a mind for optimization and cost-saving but instead of doing it on my own, I'd like to ask those that have already been through this their opinions so that I can solve the problem more effectively.
I'm at a crossroads where we could continue to do things on our own or we could just break down and spend the money to hire the professionals we probably need to take this to the next level (more marketing/sales, another engineer or two, expensive legal sessions, guidance on other things related to our model, etc...). I just want to keep cost savings in mind as much as possible moving forward since my personal savings are what is driving this forward.
So how do we as an early stage bootstrapped startup save money while also needing to fill certain positions vital to our success? Is there a more elaborate solution than simply seeking funding or asking people to work for free? What positions have you hired for that you could have done yourself, or was there any? Any general things you could have done to save money if you had the chance to start over?
Some solutions I've already thrown out of the window are 1) trying to hire the cheapest labor possible. This is a bad idea for many reasons, and I refuse to participate in it. 2) continue to seek out unpaid founders. While I believe in our idea and am putting a lot on the line to make it happen, I can't expect others to do the same. I feel bad enough that my co-founder has been doing so much for free.
If I need to elaborate on anything to get better feedback, please let me know and I'll add edits here.
I bootstrapped to 10s of Ms of ARR over 10 years. Some things I learned the hard way:
- Any idiot can cut costs, but spending money well is an art. It is worth getting good at, and that requires practice and the willingness to waste money sometimes. That’s a better skill to learn than how to lower expenses (though you should learn both) - it’s much more fun to grow your way out of a cash crunch than it is to cut your way out.
- Related: most things you spend money on are a waste.
- We didn’t hire anyone in our first 2 years. I didn’t hire another developer in our first 3. We probably could have pushed both those numbers a bit further if we were more disciplined with our own time. We were ramen profitable after 18 months, for context. *Don’t hire anyone until you have product market fit!*
- Don’t feel bad about co founders working free. The point is that in 5+ years time you’re all working for a very very good rate.
- Related: make sure you actually are paying yourselves really well in 5 years time, and/or are taking big lifestyle benefits. Otherwise what’s the point?
- You might get more tailored advice if you share what your venture does.
Thanks for the advice. Didn't want to seem like I was advertising so I didn't go into detail of what I was doing but I think you're right, I can at least talk about the industry. It's a tech recruiting agency that's focused on quality over quantity, leveraging modern (and interesting, fun and new methods) to get the right sort of talent and to truly qualify them based on real skills and help train them if they're not ready. Being an engineer in this industry for over 8 years professionally, it is painfully obvious what's wrong with tech recruiting these days and we're working on the solution(s). One way we're saving money is by targeting our marketing and utilizing methods to find engineers that are more appealing to the engineers themselves. One way we're not planning to save money is on the investment we make into candidates. The idea is, if an engineer makes it to a certain level with us, their growth is our growth. I see that as an investment and not a loss.
Bootstrapped to $12M/year hardware and software (whole widget) product co. It took a long time, 13 years.
I have a strong feeling that if I could do it all over again I’d do it more of it myself for as long as I could until I absolutely had to hire.
People tend to underestimate how expensive of an investment it is to reach yourself how to hire, how to onboard, how to coach, and even when you know all that you can still easily spend 3-6 months of a professional salary figuring out someone doesn’t fit well in your organization.
Our products have been growing 50% per year for four years now and I’m still thinking of doing more myself and with my cofounders. (We’re all highly technical)
I am happy to hear of your success and that you would tackle more on your own. Are there any examples of things you would take over as technical people and things you would absolutely avoid doing on your own?
I have to warn you that doing things myself has come with the constant guilt of “I should be training someone else to do this if I really want to grow” which is a little proverbially demon of conscience that sits there on my shoulder as I work.
I was a software developer prior to becoming a CEO, or whatever that title means, leading a company.
I’ve developed an internal cloud for managing our R&D data and processing batch research jobs in the cloud. I developed all of the signal processing algorithms and digital filters for our flagship software product.
I am also developing a time series data viewer for our industries specific data which I’ll probably have to hand off at some point.
What I try to avoid doing on my own is HR, Payroll, Finances, there are people much better suited to that and let’s be honest, we’re trying to innovate in technology, not accounting or HR (for the most part, excluding culture obviously which is critical)
As someone running a bootstrapped business, who has hired a couple of engineers (both as long term employees and for short term contracts), and now went back to doing everything alone, here are my thoughts:
- Hiring people is hard
- Managing people is hard
- Getting more people on board does not automatically make you faster
The best people won't line up to apply to your company. Most of the applications I got were from people who seemed desperate and applied to every ad they saw. Only a few people who seemed like good matches applied.
They also cost me an insane amount of money. Consider the average salary of developers in your region. That salary will get you an AVERAGE developer. If you don't offer significantly more than that, you will end up with average developers who look for an average job to put in an average amount of work. Nothing wrong with that, but consider whether an average amount of work will make enough of a difference for your company.
But even very good employees and contractors will put out a fraction of what you can put out. They will be less productive because they aren't as familiar with the project as you are. They are also less productive because they are less invested in the project.
Every employee you hire takes away a significant chunk of your time. You will need to spend time talking about your vision and your ideas, you need to plan with them what they should do, how they should do it, follow up on progress, etc.
You must be a good manager if you hire people (regardless if employee or contractor). If you are not a good manager, you can hire the best people and they will work on the wrong things and nothing will get done.
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So what happened in my case is that my employees took so much time to manage and added a lot of overhead that I barely had time to get my own work done, and since I sucked as a manager people always worked on stuff but we never managed to finish anything. In the end we did manage to build some things I probably wouldn't have managed to build on my own, but it cost me so much energy that I decided that I preferred to work on my own.
Some advice, the less time you spend in the “idea” phase, the better. You are very much in the “idea” phase.
Lightly market the product now, find customers, and build/ship an embarrassingly bad MVP for them. Study how they use the product and their feedback about it. Do this in a month. Take as many meetings with potential customers as possible, even if you have nothing but a presentation, and ask a lot of questions.
Then you will need to pivot to build what the customers actually need. Put your time and energy into the pivot, and subsequent pivots to refine the product. Do not spend time and energy developing the original idea without customers using it. It’s a horrible waste of time and resources.
For me, I would have replaced expensive, problem partners earlier, even if it seemed impossible/dangerous at the time. I would have focused on the needs of customers who were most profitable instead of building towards ideas.
That’s something I have learned before and have definitely been taking the strategy into consideration so far. We have iterated a little bit through a product but at the moment we are getting partners to help us better understand how to use our approach to solve their problems. In the limited amount of iterations we have done so far the results have been great. Thank you for the awesome advice.
> ...that have hindered me in the past, like being stingy/cheap...
Being stingy/cheap is not bad in itself. You just need to know when to be that way. Sometimes in business you do need to make big ticket expense. Just not regularly.
If you are bootstrapped then the only option is to make your customers pay. Otherwise there are the two 'F'(Family and Friends) from the three 'F'(Family, Friends and Fools). But I personally won't recommend that as it could spoil the relationships.
One method, which not many people talk about, to make your customers pay is to give them rebates for purchase and discount for payments. Once that equation is set then hiring becomes easy; and the compensation can be a mix of commission, equity and cash.
I think I have a similar path. I tried to do everything on my own and it’s just not possible. Now, I map out required skills and then I make a conscious choice of what to outsource or not.
You can find VA or specialist VA to help you with many things. Depending how much you are willing to pay, you can get a more experienced or managed individual.
That also helps you to manage your expenses. For instance, you probably read of people using VAs from the Philippines. Try that out.
Core lessons I've learned on this topic from the school of hard knocks:
1) Be a cheapskate. Identify the core things (tools, libraries, skills, etc.) that are truly critical and spend on those. For everything else, be tight.
2) Avoid fixed recurring expenses. As a rule of thumb, it's better to make a single big payment than to add another monthly bill. Especially if the monthly bill is small. You can nickle and dime yourself into trouble much more quickly than you think.
3) When considering spending more than a trivial amount of money, the important question is "will I lose more money by not making this purchase than by making it?"
4) Employees: avoid them. This ties into #2 and #3. An employee is not just a fixed recurring expense, but a an expensive one that comes with a number of downsides. Prefer contracting work out over hiring people. Sometimes, hiring someone really is better, but that shouldn't be your default approach.
Ideally you can acquire the necessary skillset(s) by offering an appreciable chunk of equity. This always involves some networking. Keep in mind that all startups are a gambit, and no one if doing anything "for free" if they're granted equity, but it can be difficult to find people with a like level of risk-aversion. And you're right, IME if there is not a lot of traction and interesting work to do, people will start wondering if their equity is worth their time.
Do you have any advice on managing equity at this (early) stage? It is actually something very new to me. I havent been able to apply it anywhere yet. Maybe time to find a business consultant. Sort of answers my question. :)
Performed a search for "pareto + budget", here's one result. https://malpaper.com/blogs/news/using-the-80-20-pareto-law-f...
Read excellent book The Toilet Paper Entrepreneur by Mike Michalowicz.
You will find excellent answers.
Summary: look at circle of your closest friends and relatives, ask them. For example many retired people are just lonely, but they could be very qualified, and could work part time, and usually possible to make them co-founders without monthly salary. May be some of friend of your friend, now looking for work (extern).
Go raise money?
i.e. don't worry about saving money?