Entrepreneur
Article
By Chris Beasley

A Penny Saved is a Penny Earned

By Chris Beasley

The biggest weapon in the small publisher’s arsenal is flexibility. A small publisher has the flexibility to adapt more quickly to changing business environments, and to find clever economical ways to get things done. In short, you can take risks.

There is this discussion going on in the forums right now about how much money you need to start an ecommerce site. I’m of the opinion that you need very little, and I have the experience to back that up. In fact in a few weeks I’m going to post a rather detailed blog post about starting an ecommerce site without spending big bucks.

However, in truth, this discussion is more about managing expenses and taking risks. A large company, with a much larger bank balance than you, can ironically not afford to take risks. When you’re not the business owner, when you’re merely a manager or running it at the behest of a board or shareholders you have to be seem to be, above all else, responsible. If your business needs a website you don’t hire the cheap labor, you hire the professional, accountable labor. Some company, who hopefully has errors and omissions insurance, who you can point the finger at if something goes wrong. That way, if something does go wrong, you can go to your boss with a clear conscious and say you hired the most reliable people you could find.

In contrast the small business owner doesn’t have to report to anyone, and he can afford to take a risk. So instead of spending $20,000 on an ecommerce system, he can go use Oscommerce, hire someone to customize it, and get a fully functional ecommerce site for less than $1000. He’s not hiring a large insured consulting company, but then again he just put $19,000 in his pocket and doesn’t really mind.

As far quality goes, I’m sure people will claim that by spending more you get higher quality. I find that grossly arrogant. Most of the cheap labor comes from students, or people from India, China, Eastern Europe, etc. These people are not dumber or less talented than US, UK, Canadian, or Australian companies. They just have a lower cost of living. In fact, quality designs that rival or beat those produced by large companies are often produced by designers such as those I mentioned for a few hundred dollars. Just look at the SitePoint Contest Forum.

Of course, the biggest reason for keeping expenses down is to increase profitability. If you only spent $500 to make your ecommerce site, and you make a profit of $50 per sale, then 10 sales later you’re in the black and the site is profitable.

This also goes for content sites. If you keep your expenses low, by working from home and looking for cheap hosting deals, or cheap software, or cheap labor, then your profits will increase. My content sites have always been profitable, and it is because my expenses have always been low. Back when large content publishing companies were losing money or going under left and right (bubble days) I was profitable. Why? Because I didn’t have a lease on office space, I did not have dozens of employees, with benefits and stock options. I did not indulge in fancy office furniture and computers. I did not splurge on trips to Las Vegas to go to some conference.

By being independent you can keep expenses low, and remember, a penny saved is a penny earned. When you’re the business owner every dime you save goes to your pocket.

When you first become successful it may be tempting to go on a buying spree. I think that some people use how much they spend as a way to validate their success, along the lines of “Because I can afford X, I must be a real businessman now”. This is a bad attitude to have and it is not conducive to continued business success. If someone tells me they spent $10,000 to have an ecommerce site developed, I’m not impressed, I laugh, because I know I can get an equivalent site for 5-10% of that.

The point of all this being, don’t measure your success by the size of your expenses, look at your profits instead. Don’t celebrate indulgence, celebrate frugality. In today’s material driven society the guy in the big house with the nice car isn’t always the most successful guy, sometimes he is just the guy with the most debt and the smallest savings. So remember, when you’re a business owner, every dollar you save goes into your pocket. Don’t go on a spending spree when because “it’s the business’ money” and “it’s tax deductible.” It’s your money, and it is the dollars you save that make you wealthier, not the dollars you spend.

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