How to save money running a start-up - tap talent don't squeeze it | Trends in the Living NetworksTrends in the Living Networks

Jason Calacanis’ company Mahalo includes hundreds of interesting user submitted ‘How To’ guides. The team saw a gap, and created their own list of 17 (and growing) tips on how to save money running a startup.

It’s a good read, and eminently practical. The thrust of the tips are to save money on things that aren’t important, but to spend on the things that are important, particularly those that make staff more productive (which includes making them happy). For example, Jason says “buy cheap tables and expensive chairs” – tables are a commodity but good chairs make people more productive and effective. He also recommends buying extra screens for staff, which makes them more efficient at their work, and buying home computers for those who want to work extra hours at home. If staff are salaried, buy them lunch so they don’t leave the office, and get an expensive automatic coffee machine to keep people from wasting time going to the local coffee shop.

Some have suggested that Jason’s tips suggest a total lack of balance, and certainly all of this can be taken too far. However as long as people can go out to enjoy some sunshine when they feel it’s appropriate, this all makes sense.

The one tip that I absolutely don’t agree with is:

“Go to each of your vendors every 6-9 months and ask for 10-30% off. If half of them say yes you’ll save 5-15% on fixed costs. People will give you a discount if they think they are going to lose the business.”

If these are stationery providers, sure. If they’re professionals, this is dumb. As I will explain in detail in my forthcoming book on how to profit from the global talent economy, the best professionals choose who they work for. If you continually squeeze your suppliers, you’re going to end up with the mediocre who can’t get work except from people they don’t like or respect.

Jason’s 18th tip is also a bit strange:

“Outsource to middle America: There are tons of brilliant people living between San Francisco, Los Angeles, and New York who don’t live in a $4,000 one bedroom apartment and pay $8 to dry clean a shirt–hire them!”

OK, but why not Canada, Mexico, north England, Estonia, or Pakistan? If they’re not where you are, they can be anywhere. Having a common culture can be helpful. But I think Jason is pandering to local sensibilities here. We live in a global economy, with certainly global traffic and advertising for Mahalo. Why should all the service providers be in one country?

http://www.calacanis.com Jason

You can certainly outsource to those countries and people do. However, I think many people overlook the fact that you can offer folks 20% less than they make in a major city and still be paying them 10-20% MORE than the currently make in a smaller city. The pay rates in small cities tends to be 30-40% less than the Valley, so a great solution is to split that savings with folks working in these areas–or give them stock options, which small companies in the midwest might not even have.
So, it’s just something to consider. There is a huge bias toward hiring folks in NY, SF, LA, Boston, WashDC, and Seattle in my experience. There are folks just as good in other cities an hour or three outside those major cities.