When should we avoid trying to save money?

A Frugal Tech Startup should continuously monitor every expense. However, expense should not just refer to money, but also to time. This is a very important concept and can significantly improve the execution speed of an organization.

Consider the ink in the office printer. Maybe we used it recently to print an offer letter for a new team member. We could have handwritten the letter and saved some ink, but did not. Why? Because it would have taken far too much time. Money is also just another resource. It has some unique and special properties compared to other resources like ink, but we tend to overvalue money compared to other resources, specially when compared to our time. When we waste time in an attempt to save money, then more often than not, we unknowingly end up wasting money also.

Let’s look at a few expenses where we should not skimp.

• Laptops. Many companies, not just startups, do not spend enough on laptops. Some get decent laptops for their engineers, but not for the other teams. A laptop which is fast, has a good screen and is durable is probably one of the best investments that we can make. My recommendation is to go for enterprise grade laptops from a reputed brand with at least 16 GB RAM, 256 GB SSD and a full-HD screen. I personally prefer Dell Latitude, but HP ProBook and Lenovo ThinkPad are also good candidates. The processor rarely matters and Intel i3 should be sufficient for most use cases. This kind of laptop should cost less than ₹50k (~$700) per unit.
• Internet Connection. In today’s world, an office must have an internet connection which always works, and allows everybody to stream videos in parallel without any buffering. People will probably not stream videos simultaneously, but this is a good benchmark. I will do a separate post soon on the ideal network architecture for a small office.
• Office Boy. This is often overlooked, specially during the initial days. The typical thought process is that the office boy will work for only a few hours a day and we will be wasting most of the money we spend on him. Hence, let’s do the work ourselves. The point that we miss here is that he will save a few hours a day of somebody else, most probably the founders. Is that time worth the money spent on the office boy? More often than not, yes.
• Outsourcing and licensing. Never hesitate to outsource tasks or purchase a license for something which enables the team to execute faster. As an example, let’s assume that we need a database of all the doctors in the country for our product and there are two options. Option 1 is to purchase the database from a vendor for $5,000 one time + $1,000 per year for maintenance. Option 2 is to create and maintain the database ourselves. To do that, we would have to download raw data from every state’s medical council website. Some will make the data available in Excel, others will have PDF files which will need OCR while others will have web pages which will need to be parsed. Every state may have a different format, and maybe the data will be in the local language which will need to be translated / transliterated to English. It will take the team weeks of effort to create a consolidated list and then keep it up-to-date by handling the frequent changes in the websites of the state medical councils. Is spending $5,000 worth it? Definitely yes. If this data is critical to the product, then maybe we can have two separate sources for the data once the product has started bringing in decent revenue.
• Execution Tools. Audio / Video conferencing for Sales, Payroll Management for HR, Accounting System for Finance, Issue & Project Tracking for Engineering etc. are some of the tools needed by our teams to improve both the quality of their work as well as the speed at which they deliver. We should get all teams all the tools that they need. Sometimes, people may ask for more than what is really required, so we need to evaluate every request to figure out if the tool is really going to be useful. However, more often than not, startups tend to under-spend and rarely over-spend on tools. Zoho One is probably a good starting point for small and mid-sized companies.
• Chairs. No company should buy cheap chairs, ever. They are uncomfortable and lead to various health issues. It is acceptable to save on tables, office ambience etc. but not on chairs. Always get good quality chairs with proper lumbar support.
• Food & Snacks. Free food and snacks have a huge impact on team bonding. It also saves time – since many people would otherwise go out to eat at some restaurant. You could order-in (the office boy will help here) or subscribe to a catering service or even hire a cook and setup a kitchen – it depends on how large the team is and the logistical feasibility.

This is just a representative list – may or may not be applicable to every team. However, the core concept remains – every investment (of money as well as time) must be scrutinized and prioritized basis the potential Return on Investment and not the absolute cost.

Frugality is not about reducing costs and saving money. It is about prioritizing where we invest the limited time and money we have to maximize the total value we can derive from that investment.