If you’re setting up a business, cash flow is king. And cash flow is a function of cash inflows and cash outflows. In other words, you need to be frugal.
The easiest way to make a profit is to not spend money. You need to be frugal. Keep your costs down. Remember, you’re not spending your parent’s or your employer’s money anymore.
You’re spending your own money, so try to hold onto as much of it as possible. Here are some suggestions on how to accomplish this.
1. Do not hire an IT guy
Especially when coming out of a big company, the world of IT seems so intimidating that it feels absolutely necessary to bring in an expert. Apart from the danger of adding overheads, an IT guy lets you abdicate responsibility for an important part of your business that’s actually not so difficult nowadays.
Don’t try be cool and go with the latest craze. If you know Office, stick to it. Don’t want to start with a fully functioning system.
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2. Nail your brand early; it makes life easy going forward
Find someone (an individual) who provides the full bouquet: Logo, letterhead, website. Do not use a pricey ad agency! If you become a monster corporation one day, sure, go ahead and use the same companies as MTN or Bralirwa. Until then, be frugal.
Also, design your own business cards. Use genius printers. Best quality cards in Lagos Mainland. I have been impressed by their service and support, (Always available and charge no design fee) and when you’re a start-up, you need as much help as possible when it comes to working with less money.
Even more important than business cards is a sign. You’re not a real company until your office has a sign.
3. Buy the stationery yourself
When you come from a corporate, you’ll be at a loss as to how to do things yourself. Finding printer paper, booking flights, etc. will seem awfully complicated. Fear not, you too can do it. You’ll find you get better deals than big companies do, even though they supposedly have much greater buying power. Also, you’ll get a feel for how much stuff costs in the real world. Like one litre of milk (250 Frw). Or a 15 minute flight from Kigali to Kamembe(80000 Frw). It’s difficult to be frugal if you don’t know what stuff costs.
4. Use the cloud
Ignore the noise of all non-cloud vendors. Use the cloud for document storage (Box), sharing (Slack), CRM (Salesforce), hosting (AWS), websites (WordPress), etc. Don’t do it yourself. Let someone else worry about encryption, back-ups and data security.
5. When in doubt, don’t do anything
There are many things that seem essential when you’re in corporate, but which are in fact superfluous like meeting in expensive coffee shops and hotels. Generally speaking, the quality of a meeting does not depend on the venue rather on the content and your persuasiveness, learn to do it yourself, buy a coffee machine and have most of your meetings at your office. If you can’t figure it out, ask friends how they do it. If you don’t know how to do it, Google it. If you don’t know how to Google it, stay in corporate.
6. No matter what, be frugal
Some companies boast of valuation or revenue or profit or users or share values. Outside of Silicon Valley, these metrics are meaningless. The only meaningful metric is cash flow. You need to spend less money than you make. The starting point of positive cash flow is to be frugal. Don’t spend money unnecessarily.
Ignore the accountants, ignore depreciation, ignore goodwill, ignore your balance sheet, ignore your income statement, ignore your valuation, ignore your revenues. Instead, pay attention to your cash flow statement. Revenue is vanity. Profit is sanity. Cash flow is reality.