“You’re cheap.”
This exclamation is rarely used as a compliment. Quite the opposite, it is typically used in a derogatory manner. An accusation that they haven’t earned enough to spend their resources on what most deem an everyday expense.
But if you’ve ever charged a business owner or an entrepreneur of this “character flaw,” you know it is not received as such. Their sly grin and cool shrug indicate an understanding of something that you, apparently, don’t. Your words aren’t received with pain or a offense. On the contrary, you’ve just given them a compliment.
Building A Profitable Business
It can take a long time for a new business to become profitable. Many never see the light of that fruitful day.
It is widely acknowledged that the first two to five years of operation, depending on the study, are the most crucial for new businesses. The first few years are often filled with learning curves, hefty cash outputs, and the company’s struggle to define itself and its ideal customer.
If the new company is considered a small business, a single person operation, the owner is typically the one wearing all the hats: marketing, sales, accounting, warehousing, logistics, janitorial, etc. They understand how their operation works inside and out. They know how long processes take and they grasp how much supplies cost.
If a new business is started with a team, each team member wears a few hats, not just the owner. The guy in accounting doubles as the janitor. The girl in sales figures out how to run the website. The owner hires new people only when his plate is overflowing. The Jim Collins idea of getting the right people on the bus is more true than ever. There is no such thing as specialization in the early life of most businesses – everyone is a team player who does more than their share.
In these early days the business owner gets an intuitive feel for their organization. They know when the business is profitable before the ledgers tell them so. They understand when danger is coming well before the contract is lost. And they realize the business has been one sale away from not making payroll more times than anyone may ever know.
The nicer paperclips that cost $1 more, the nicer car that comes with a payment, and the fancy office digs aren’t worth the added expense in their minds. Had the business owner not been “cheap” and opted to pay for all those luxuries, payroll wouldn’t have been met with said single sale. They’d just be short.
Starting From Scratch
When a business is started, there’s usually not much to brag about. You’ve got some paper, maybe a website, and if you’re lucky, a customer or two. Most of what makes up the organization is the entrepreneur’s vision of what the business could be.
The business owner sees the first sale. They pay the first bill. They have the first mental breakdown, it comes with the territory. But, they are rewarded with growth.
Fast-forward five hard years. The “cheap” business owner remembers what it was like to have nothing but a vision. They remember why they quit their job or when they couldn’t find one. And they remember when they decided to pursue this crazy idea of their own business. They’ve come to recognize the freedom that comes with their hustle. The freedom that was made possible through their frugality. They welcome the accusation of being “cheap” and they’ll wear it as a badge of pride.
NOTE: I’ve used the terms “cheap” and “frugal” interchangeably for simplicity’s sake. I understand there’s a difference, but the perception to most of the world is the same.
A (Brief) Cautionary Tale
Frugality has been hardwired into many entrepreneurs’ brains and it’s nearly impossible to turn that switch off. Consequently, this is where many business owners get stuck. They do not evolve past the start-up phase of their business. Different approaches are required to grow/scale a business than to start one.
Business owners, remain frugal, but understand your frugality’s limitations:
- Don’t wear 10 hats, when you can hire someone else to wear five for you. Understand your time’s value and focus on what you do best to maximize profits.
- Compensate your people as best as you can. It’s more expensive to replace them in the long run.
- Don’t overpay, but don’t cut corners on quality. Negotiate, but don’t compromise.
- Avoid wasting time, but don’t write off all ideas before ever exploring them.
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That secret, the one their eyes when you called them “cheap,” was that they understand the sacrifice required to run a business. Consequently, they understand the freedom that comes with making their own schedule and the pride that comes with knowing that they have built something from scratch. So next time you think you’re insulting someone by calling them “cheap” be sure to ask yourself if you’re really just complimenting an entrepreneur.
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Do you have a story about extreme entrepreneurial frugality? I’d love to hear about it. Leave a comment below or ping me @mikemccann3 on Twitter.
