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241: How To Save Money As A Startup (Improve Cashflow)

In today’s episode, Steli and Hiten discuss the various ways startups can remain cashflow positive. You can manage your cash flow by generating more revenue or by simply controlling your expenses. Steli and Hiten stress the value of tracking expenses, deciding what’s worth your money, and how negotiating for those larger expenses can go a long way in staying cashflow positive. They also explain  why long term contracts should be avoided by a startup and how the right mix of common sense and planning can prevent your costs from spiraling out of control.

Time Stamped Show Notes:

00:05 – Today’s Startup Chat discusses how you can manage to stay cash flow positive

00:30 – So far, Steli and Hiten have concentrated on how to generate cash

00:51 – Today, we are going to talk about managing cash flow via generating more revenue as well as controlling expenses

01:16 – Two simple steps to save money and improve your cash flow:

01:25 – The first step: know where you are spending it, second step is to determine where this money should be spent or not

01:46 – Ask yourself whether there are any cheaper alternatives

01:56 – Have a set evaluation process in place which can help you determine if the money is worth spending

02:23 – Most startups do not have a defined process for making purchase decisions

02:45 – In all of Hiten’s businesses, expenditures are entered into a spreadsheet and checked regularly

03:08 – In smaller setups, the responsibility of entering this data is with the cofounder or someone reporting directly to the cofounder; In larger setups, a finance professional looks after this functions

04:00 – Centralized purchase decisions are quite uncommon in the startup world; smaller purchases can be made by numerous individuals which leads to expenses spinning out of control

04:56 – Spending is a subjective thing and different people tend to react differently to different expenses

05:32 – Steli does not put too much thought behind expenses less than $100, whereas he is really conservative when it comes to big purchases; his cofounder is aggressive with the larger purchases and careful with the smaller ones

06:43 – Smaller purchases tend to add up to a significant amount in larger organizations

07:15 – Spending habits can be traced back to a person’s upbringing

08:00 – Not wanting the weight of monitoring cash flow, Hiten prefers to let his cofounders handle this business function

09:53 – Always spend less than you make to be cashflow positive

10:11 – Keep a close watch over your cash flow, especially if you have yet to raise money

10:25 – Monitoring your bank account and credit card statements is a simple hack which will help you be cashflow positive

11:05 – Negotiate really hard; the higher the expense, the more you should negotiate

11:28 – Particularly applicable to technology infrastructure providers; you can save a significant amount by renegotiating, entering promotional codes, discount coupons and establishing relationships

15:20 – Quite common for founders to lose track of their expenses and run out of money

15:58 – Even implementing standard, basic checks will go a long way in ensuring that a startup does not run out of money

16:15 – Be cautious while signing long-term contracts like office leases; if you hit a rough path and need to downsize, your office lease will be like a noose around your neck

17:18 – In your greed to save money, do not end up defaulting on a contract

17:56 – Do NOT sign a long-term contract unless you can accurately forecast what your tomorrow will look like

18:30 – Not impossible to renegotiate or even get out a long term contract; for instance, you can find a sublease for your office space

19:20 – Delaying renegotiation might leave you with no wiggle room at ...


Key Smash Notes In This Episode

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