(From Aidan Directors Blog, 7 May 2009)
Running a small business is all about making cash.
Accounts receivable is not cash. Investment in mutual fund is not cash. Letter of intent is not cash. Promise from your high school friend to talk to his rich uncle to invest in your new venture is not cash.
What is cash? Cash is what you can buy stuff from 7-Eleven with.
There are only two ways to make cash. First, make cash sales. Second, cut costs (as Ben Franklin once said, a penny saved is a penny earned). The first one is obvious and thus need not any elaboration. The second one is not so obvious, judging from many small businesses I’ve seen. Unnecessary expenditures cause small businesses to unnecessarily burn cash and eventually go the way of Pets.com.
Here are top ten ways new businesses waste money:
1. Office look
You don’t need that RM5,000 workchair because it’s “ergonomic”. You don’t have to paint your wall Chartreuse Yellow because it gives solace to your soul. You don’t need mahogany door because it may give good impression to your clients.
On the other hand, get your office furniture cheap at a second hand furniture store. There are many companies that went bankrupt during the recession, so you can buy perfectly good furniture at budget price.
And about impressing people: clients are impressed by high profit margin and healthy balance sheet. Mahogany door will not get you a bank loan.
Rather than attend courses, buy books and look things up online. Everything you need to know about doing business is available on the Internet.
Professional courses are usually expensive, since they are held in starred hotels complete with 3 to 4 meals a day. This is suitable for executives in large corporations, but not small business owners. Most of the time, people go to courses to escape from work, and to eat buffet lunches paid for by their company.
Government agencies usually organize cheap or free courses to help small business owners. These are the ones you should go to.
3. Shiny business cards
I have collected hundreds of business card belonging to small business owners. Most of the business cards are glossy and high-quality. Predictably, many of these businesses are not profitable, because their owners are too busy spending money on glossy business cards.
Let me ask you this: why make business cards at all? There is only one correct answer to this question. Please think about it before reading on.
You make business card to give out your phone number and email address to other people.
Make a lot of cheap business card and drop them everywhere. Iznan went to Canton Fair (the largest trade fair in China) last October and dropped hundreds of business cards. Until today, we still receive calls, emails and solicitations from companies in China. What is the use of glossy business cards if nobody ever call your business?
While we’re at this topic, please do away with that cutesy small font. It’s damn annoying to comb through tons of business card to find yours, only to find that I need a laser microscope to read your fax number. Write your phone number and email in LARGE FONT.
Yes, everybody like to see his company logo all over the company documents, from invoices to memos. But custom stationeries are expensive to print; better use your cash for more productive pursuits.
What you should do: Photocopy the forms. For invoices etc., embed the logo in Microsoft Words and print it with the documents (in B&W, to save money on color). We only use custom company letterhead for outgoing letters. Custom envelope is stupid. The prettiest envelope will be chucked into the wastebasket after it is opened. Just stamp your company address on the envelopes for outgoing mail.
Nobody gives a shit about corporate websites; the only thing worth reading is what you are selling and at what price.
Unless you have an in-house designer, do not hire professionals to do your website. It is expensive. Nobody cares how your website looks like as long at it is easy to retrieve information. Anybody with a brain cell can create a nice website from the various portal management systems available. For fancy designs, use skins instead.
If you want to write a company blog, like this one, do it on WordPress.
Don’t forget to put your company address, phone and fax number ON THE FRONT PAGE OF YOUR WEBSITE. I have been to government websites with million-dollar budgets having the contact info buried so deep inside you have to click four times just to get a phone number. What do they have on the front page? Visi dan Misi. People are morons.
6. Computers and accessories
A couple of years after we started the company, we have not spent a single cent to buy a computer. Everybody uses his personal laptop, which is more convenient. We only have one desktop in the office, my personal desktop which I bought in 2004. Using networking, everyone can access shared folders on the desktop to keep important company files.
Jot down the dates of the next PC Fair to buy all your computing needs. Do not buy more than you need. If your business doesn’t require you to print hundreds of pages a day, you don’t have to buy expensive 4-in-1 “printing solutions”. Just get a cheap printer that can print fast. Nine out of ten times it is cheaper to walk to the photocopy shop, rather than leasing a photocopy machine for your office.
7. Office supplies
Many office supplies are unnecessary. The fact that other offices have them doesn’t mean you need them too. New businesses probably don’t need highlighter pens, multi-colored papers and seventeen sizes of paper clips. Office supplies don’t cost much, but the cost will accumulate.
This is practically all you need to start a business: pens, pencils, staplers, paper clips and files. Anything more is luxury.
Unless you’re dealing with lots of proposals, binding machine is not needed. And a new business doesn’t have many confidential documents to shred, so put off buying that shredding machine for another five years when your business really needs it.
Use supplies from home. I use only one cheap pen (Faber Castell Ball Pen 1423 0.7mm) for all my writing. It goes with me wherever I go. We do not have a budget for personal stationeries, except work related (staplers, paper clips and files). Staff have to buy their own pens and notebooks.
You don’t need a rerigerator or a microwave. Eat lunch outside. If you need a pantry, only stock it with basic foodstuff, like 3-in-1 mix and biscuits.
Make it a policy that company will not buy supplies for the pantry, although staff are welcome to bring food and drinks in. Remember, you are not Google.
I do not condone piracy. Make sure your Microsoft Office and Adobe softwares are original. If you can’t afford it, use open source softwares.
Do not spend on software you don’t need. Small business don’t need accounting and inventory management software. Existing software might come with 3 functions you need and 997 functions you don’t need. Just do everything by hand so you have a hands-on experience keeping books (Excel is great for accounting).
Manage payroll by hand. If you have a small number of staff, print your payslip manually, and write checks by hand. It is easier to keep track of your finances if every cent going in and out is under your pen. After you employ 50 people, then you can ask the bank to do your payroll.
This costs more than the other nine things put together, so please pay attention. Many entrepreneurs, when starting out, are too generous with their money to buy favors. This includes buying meals for potential clients, paying for trips and gifts for Datuks and Tan Sris. There is nothing wrong with buying legal favors, but choose your battle wisely.
Government officers (corrupt ones) are fond of ripping off new business owners while promising you about contracts and “opportunities”.
A rule of thumb: only entertain people who are decision makers (or their proxies). Do not entertain desk jockeys and middle managers. It will be a waste of time and a waste of good cash. These people may promise you millions but they can’t even sign a voucher for RM500. Don’t believe him when he says he will forward your proposal to his boss. 99 out of 100 times, it doesn’t lead to anything. Trust me on this.