The Cheapskate Entrepreneur

I worked for a man for almost a decade, who was one of the cheapest operators I ever met.  There was no corner he was not willing to cut, as long as it did not directly impact the customer experience.  The business he ran was insanely profitable.  I learned a lot from this person, whom I still think of fondly as “the cheapskate entrepreneur”.

He did see the big picture, and he did value quality, safety, and reinvestment.

But he was absolutely opposed to unnecessary expenditures.

The question we have to ask ourselves as entrepreneurs is: which expenditures are necessary?  My advice, based on learning from this particular mentor, is to operate your business as cheaply as you can.  Manage the economics of your business tightly, maximize your profitability, and minimize your expenses.

Many think of these as basic business ideas.

Perhaps you think this post does not apply to you.  Perhaps you are right.

Then again, how much did you pay for the chair you’re sitting on right now?  And how much did you pay for the triple-latte sitting on your desk right now?

There is honor – and wisdom – in being a cheapskate entrepreneur.

Something to think about.

Question for you: What ways do you save money in your business?

Ray Edwards is a world-renowned copywriter and communications strategist, writing for some of the most powerful voices in leadership and business including New York Times bestselling authors Jack Canfield and Mark Victor Hansen (Chicken Soup for the Soul) and Tony Robbins. Ray is a sought-after speaker and author, hosts a popular weekly podcast, and blogs at RayEdwards.com.

Please note: I reserve the right to delete comments that are offensive or off-topic.

  • StuMcLaren

    Spending needlessly is one of the fastest ways to suck any profits from a business.
     
    How do I save money?
     
    - I work from home and live in a small rural town where the cost of living is 3-4 times cheaper than if I were renting an office or living in the closest major city just 45 minutes away.  Because my business is primarily online, it doesn’t matter where I live.
     
    - Before hiring another employee, I always ask “Am I maximizing the potential of the people I already have?”.  Many times there are inefficiencies in the business and hiring another person is just creating a band aid solution.  A better approach is to work on developing a better system vs. hiring a new employee.
     
    - Another way I like to save money is by reviewing my credit card bill every month.  You’d be surprised at how many recurring charges you incur for services, memberships or products you no longer use.
     
    Great post rayedwards !

    • http://writingriches.com/ RayEdwards

       @StuMcLaren Those are very helpful nuances, Stu – especially on the subject of when and if to hire new employees! Thanks for sharing these.

  • SarahBethWrites

    I have to pick at your analogy of “wasteful” expenses, Ray. When you sit at your computer eight, ten, twelve hours a day, the chair you choose is critical to your health and well being. My mom is about a ten hour person and the wrong chair cuts off her circulation over that length of time.
     
    On the other hand, again for health reasons, I applaud ditching the triple-latte! Not only is the caffeine and sugar damaging, people would be amazed at the hundreds, even thousands of dollars they toss out on drinks alone.
     
    I keep things cheap by working from home, using free services when I can, and bartering my writing for everything from graphic designs to computer repair to sewing.

    • http://writingriches.com/ RayEdwards

       @SarahBethWrites What your observations illustrate, it seems to me, is that necessary varies from person to person. What is needed is the discernment to separate the essential from the superfluous. Thanks, Sarah!

  • http://www.imagerymagic.net/ Ministryguru

    When we first started our business, $30,000 credit card in tow, we totally lost sight of this. We just ‘knew’ that money would start rolling in once we were up and running. Well 4 years later and a maxed out card that was cut off, we actually stepped into reality. Now I can totally write a book on boot strapping a business and Guerilla marketing. Learning the hard way has to be the worst way to learn a lesson, but it’s a lesson that sticks with you.

    • http://writingriches.com/ RayEdwards

       @Ministryguru I have paid a similar price for this lesson. I don’t cherish the experience, but I do cherish the lesson!

  • http://www.transferbusinessonline.com/ carolfarbe

    From a entrepreneur stand point, I agree with you concerning a cheaper chair while skipping the coffee. Not eveything is necessary.  But from a stand point of customers, it might be different.
     
    My husband (an electrical contractor) and I have had a small business for several years.  Even though the customers’ safety was involved, some would not take my husbands recommendations because they were so cheap.  If the customer would not see a ‘visible’ improvement, they did not want to get the work done by a licensed professional.  They preferred to have a neighbors-cousins-brother-in-laws-kid do it at a very cheap and unsfafe rate.
     
    I think it boils down to the individual person.  That old saying of “the customer is always right” may not apply when the customer doesn’t know what’s good for the!

  • http://www.bradentalbot.com/ btalbot

    Pay for a good tax accountant. This will pay you back in the long run. I am just now learning how much more money I could have pocketed by incorporating 18 months earlier.

  • http://RobertMiller2000.com bestprac

    Hi Ray,
     
    Your post reminds me of the work of Dave Ramsey in Total Money Makeover.  There are basic financial foundational principles at work here which do not change, which include saving for an emergency and spending frugally short term in order to succeed long term.  I do believe in these principles and even taught Ramsey’s course in my church. 
     
    Having said that, there is an issue that I have encountered when building an entrepreneurial enterprise from scratch, this is the issue of credibility.  I think in order to build a business you need credible and useful tools applied at the right time.  For me this includes internet marketing courses, coaches, software and products which are right for me at the right price at the right time. 
     
    Unfortunately for me, and I take for other entrepreneurs, this has been a learning process with some pain.  In other words, I join those who have spent unwisely because I did not have the wisdom and experience to know otherwise.  I think credibility and confidence in becoming a true “cheapskate entrepreneur” means learning from credible teachers and courses who have gone before you and the wisdom that comes from the experience making mistakes.   When I listen to the stories of successful entrepreneurs almost invariable they speak of the learning curve of losing money on bad decisions before they succeeded.
     
    I think a part of the secret of the successful entrepreneur is indeed have a frugal approach and moreover, have the guts and endurance to push through bad decision that lose money to the point of profit and prosperity.
     
    What I’m looking for, and perhaps is a opportunity, is a means to shorten the learning curve to “cheapskate entrepreneur” by building credibility.
     
    That’s my take on the subject, meanwhile I’m building a business to save the world!
     
    Be God’s
     
    Robert Miller

    • http://writingriches.com/ RayEdwards

       @bestprac Well stated, Robert. Thanks for your contribution on this post.

  • sparagi

    Good one.I don’t like scarcity but rule number one in business: Don’t run out of money. Part of that is being as frugal as possible with out sacrificing the customer experience.

    • http://writingriches.com/ RayEdwards

       @sparagi That “customer experience” part is very, very important! Thanks.

  • http://maxkazen.com Max Kazen

    One of the best ways I’ve found to save money is to stay off webinars that promote a product or service that I “might” use, or that I “might” find helpful. Too easy to fall prey to that “power of persuasion.” Now I’m more inclined to just ask “If I buy it, will I be able to use it TODAY to accomplish what I NEED to get done?”

    • http://rayedwards.com Ray Edwards

      Max, this demonstrates the value in knowing yourself well enough to create an environment that helps you make empowering decisions. Well done.

  • http://www.DennisBauer.com Dennis Bauer

    I know someone who is a spender, who just enjoys shopping, and who one day realized, “I’m buying a life.” Psychological issues got in the way of wise decisions, and there was more than one price to pay.

    • http://rayedwards.com Ray Edwards

      That is often the case.

  • http://www.AnmariMedia.com Marshall Bone

    Being a wise steward is a timeless, but rarely taught, principle. Thanks Ray for reminding us to diligently manage our bottom line.

  • http://hugeprofitstinylist.com Connie Ragen Green

    I save money in a variety of ways. One way is that I do not purchase anything unless I am going to definitely use it within the next 30 days. If not, I will not mind spending more at a later date if that is the choice. Also, I continue to share a hotel room whenever possible because I am on the road about fifty days a year speaking at and attending live events. This is a huge savings for my business, and an added bonus is that I get to know people very well this way.
    Connie Ragen Green

    • http://rayedwards.com Ray Edwards

      I have always admired your practical frugality, which I interpreted as good stewardship. You’re also one of the most congenial people I know!

  • Ruth Chapman

    I am willing to bootstrap rather than get business loans. I use free or reduced cost resources when possible. I turn out lights when I leave a room or when the sun can brighten the room instead. As long as the customer isn’t negatively impacted, then it only makes sense to increase your profit margins by reducing or eliminating unnecessary spending. Sam Walton, Warren Buffet, and Martha Stewart would agree.

  • http://www.ilenesaidel.com Ilene

    I also learned a lot from working for a cheapskate boss although it wasn’t always comfortable.

    • http://rayedwards.com Ray Edwards

      LOL now that is truth!

  • http://losinaartcenter@gmail.com Bill Beatty

    True enough those little expenses add up over the months and years.

  • http://Overallbeauty.com/shop/ Kim Snyder

    What I have started doing is watching myself about the shiny object things that may or may not be helpful. If I think it might be helpful down the road? Then I don’t buy it. If I can’t use it right now this minute, or have a use for it? I am stopping myself from buying it. I have noticed that just stopping myself from clicking the buy me button for even just a minute? I don’t buy it. Just making sure I have a true need for the item has saved me so much money!
    (I’m a sucker for wordpress plugins, so yeah I have to really ask myself just how useful it will be and who is the creator of it.)

    • http://rayedwards.com Ray Edwards

      Those are good questions to ask. I tend to be a bit of a sucker for WordPress plug-ins too.

  • Dan Tredo

    I’m a cheapskate entrepreneur by necessity right now. So maybe my meager means will force me into a good habit. Thanks Ray.