Good Financial Advice for Startups

I stumbled across a Techcrunch post about how startups need to manage money and hiring processes or risk failing that came as a result of a post by Jason Calacanis about how startups can save money that was then sensationalized and heavily criticized.

The debate reminded me of the thoughts on handling employees at a startup (and the extremely differing opinions on the topic) that were shared a while back by Rand, Andy and myself. Michael Arrington and Jason Calacanis seem to agree with Andy and myself that “jobbers” are cancer to a startup and need to be ousted as soon as you figure out you’ve made the mistake of hiring one. Rand seems to be more with Duncan and Stilgherrian.

Michael made one potent and all important statement in his article:

You cannot waste money because every dollar is an amount of time you can keep running the business before you have to shut down. Run out of dollars before you reach profitability or convince investors to double down, and you’re done.

The only thing I might add is that you cannot waste money *on consumer goods or on employees* and that if you find you’re doing either, you must stop – stop spending or start firing those who aren’t giving you the best bang for your buck possible. Harsh? Maybe. Necessary? You bet your ass.

That said, Calacanis had some smart suggestions (though I wasn’t in like with them all) on saving money…

Buy second monitors for everyone…

I couldn’t agree more and every employee in my office has a double monitor setup. If there is one thing we can’t afford to be cheap with as an Internet startup, it’s our computer and monitors. The money spent on the front end is recouped many times over in the long run.

…establish a no-meetings policy…

While I’m not buying my employees lunch four days a week (though I do once in a while) I do believe heavily in the no meetings policy. I worked for a corporation at one point in my life that was obsessed with them and would drag every single employee in the company into a meeting for hours every Friday… the “higher level” employees like myself got to go to even more. They were always a waste of time, boring to employees and took time away from being able to do real work.

Buy cheap tables and expensive chairs…

That pretty much describes our office setup for all the workstations (our chairs aren’t Areon, but they weren’t cheap either) – even mine… though we did recently splurge on a bookcase and a set of drawers (and I hated every second of spending that cash).

Don’t buy a phone system. No one will use it.

I bought a cordless phone system (next to the printer) with two handsets that are as mobile as they need to be and that is what we use in the office. We’re not on the phone a lot and a regular phone works just fine for our needs.

Rent out your extra space…

Done. We sublet some of our office space out to one other small company and we’re like this weird little hybrid family now. We save on our own costs and get some great minds (and users with social media accounts) at the same time.

Allow folks to work off hours…

All of our employees have a choice on their hours (within reason)… some come in as early as seven a.m. and others as late as 10 a.m. – and we aren’t in a “commuter heavy city”… I simply give the option so they can have some flexibility on when to start their work day and work during the time they feel most productive.

Outsource to middle America…

Some of our best “employees” are full time contractors who work from home within “middle America”. With Basecamp (ironic ain’t it), IM, webcams, email, multiple means of BlackBerry communication, etc. being remote definitely doesn’t mean being isolated from the team.

Several other things Jason suggested – outsourcing accounting and HR, utilizing Google docs instead of Microsoft Office (unless you’re the type of company to use bootleg copies, which we of course, most certainly are not) and keeping the fridge stocked full of sodas are also things I’m also doing with my company.

Pat Phelan made some additional suggestions which included not flying first class (I would never use company money to upgrade, but would use personal money or points) and having events and conferences justified before spending the cash to attend them (SEO conferences are on my own dime because they largely are about giving back and seeing friends now… company money only goes to conferences where we think we can get the ROI on attending). Pat also mentioned keeping your company offices away from large metro areas, which we’ve also done.

Robert Scoble also chimed in saying he thought Calacanis was right on his tough stance on hiring/firing, though I can’t say I agree with firing the smokers but maybe the fact that my smokers are working late, from home and doing whatever it takes to get their tasks done on deadline and better than required has softened me there. But I did agree with his suggestion of doubling up on hotel rooms… our guys are doing so at the end of the month for a conference.

As my own added money saving tip…

- We trade if and when we can. We have valuable skills and we’re not adverse to trading them with people who have other valuable skills when the opportunity arises *and* is a win-win situation for both companies involved.

On the subject of “firing those who have a life”, I think Jason said it very well in his subsequent post

Some people work in order to live (like I did in IT), while others live to work (like I’ve done most of my adult life).

I won’t hesitate (and haven’t hesitated in the past) to get rid of an employee who is just showing up to collect a check. I find it amusing that people automatically assume that if you cut the slackers and keep only the achievers, then the employees you do keep must be miserable. From Stilgherrian’s post

Can you imagine what it’d be like working for this guy? Do you think you’d get much loyalty in return for being a wage-slave?

Guess what – being expected to be a stellar performer does not automatically make someone miserable or make the person with the expectations an asshole. Our employees, according to their feedback to me, are glad to be in an environment where they are valued, they’re able to learn a hell of a lot from the fast pace and feel that they are part of a fantastic team of talent, drive and meaning.

If you think expecting hard work brings resentment, try talking to your best performers who stay late, work hard and always over perform and ask how they feel about being paid the same and treated the same as employees in equal positions who start packing up to go home at 4:50 in the afternoon – *that* breeds resentment folks. Along with feelings of under appreciation.

In my opinion, being kept on a team with high standards that *also* recognizes and rewards those efforts breeds satisfaction.

About Rae Hoffman

Rae Hoffman aka "Sugarrae" is an affiliate marketing veteran and the CEO of PushFire, a search marketing agency specializing in SEO audits and link building strategies. She is also the author of the often controversial Sugarrae blog. You can connect with Rae via Twitter, Google+ and Facebook.

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