We’re always trying to save money, but sometimes that can hurt more than help. Here’s why.
I know the fear.
Money is tight.
When you’re a bootstrapped startup, it feels like money is always tight.
It can feel like every hire, every software subscription, every purchase is just taking you closer and closer to the end of your runway. It’s scary.
And in some cases, it’s true, and a frugal mindset is invaluable there. You probably don’t need that fancy office (or, if you’re remote like us, any office at all) or that PR agency that promises you TechCrunch.
But I’ve also learned that in many cases, that mindset is one of the most dangerous, showstopping obstacles to growth that a startup can face.
The reality is that there are many things worth investing in—not “spending on” as the frugal mindset urges you to think—that can pay off many, many, many times over.
“Sure,” you might counter, “that’s easy to say when you’re profitable.”
But here’s the thing: I learned this lesson early on from much smarter, more experienced entrepreneurs, and I’ve been fortunate to have been applying it to Groove ever since our early days, when counting pennies was necessary to even have a chance of staying alive. Even then I made sacrifices so that we could invest in growth.
And today, I’m fortunate that those investments are much bigger, but I’d still be scared to make them if I hadn’t changed the way I thought about spending money in my business.
6 Investments We’ve Made That Have Paid Off
We’ve pinched pennies in just about every facet of our business so that we could afford to invest in initiatives like these:
1) High-Quality Videos
You can get a product demo video done fairly cheaply.
There are plenty of options online with amateurs offering to create videos for a few dollars.
And your customers will be able to smell that discounted work from ten miles away.
Video is one area where we’ve found a huge delta in customer feedback and conversions between high-quality work and less polished efforts.
Our original product demo video was shot and edited by a friend of mine, and while it was good, it lacked a story. Much of that was our fault; it was our first attempt at video and we didn’t even know what to ask for.
But when we finally hired a great production company—Less Films—a lot of things changed.
Note: Less Films was founded by Allan Branch, who is a Groove customer, but we’re getting absolutely nothing for mentioning the company here, and they don’t know that this post is coming.
The biggest reason I mention them is because we keep getting emails like this one:
Eric and the Less Films team worked hard to understand our customers and our business; in fact, the first questions they asked were about our customers, rather than our business, and given how much we’ve learned about the value of understanding your customers, I knew that they would do a great job for us from the start.
I covered the video production process in detail in this post, including the actual scripts we wrote, the rough cuts created along the way and our production/editing notes.
The project wasn’t cheap. But the results have been staggering.
When we replaced our old video with the new one, conversions immediately increased:
And we continue to get feedback from new customers that suggests that our demo video plays a role in their decision to sign up:
2) The Best Talent You Can Find
Building a startup is tumultuous. It’s a lot of lows, and if you’re lucky, more and more highs as you grow.
But mediocre teams never climb out of the lows. They don’t have what it takes.
In my experience at past companies, when mediocre teams are faced with impending failure, they either freak, or they fold. When great teams are faced with impending failure, they rise.
Great employees are expensive. Very expensive. But when the shit hits the fan, great employees are going to be what gets you out of it.
But don’t make the mistake of thinking that salary is the only way to invest in top talent.
Yes, you need to offer competitive salaries.
But you can invest in top talent in other ways, too:
- Generous equity compensation (this is very important to the type of people that many startups want to hire)
- Hustle to elevate your brand so that employees are proud of the name of their employer
- Invest time in culture building so that great people love working for you
Speaking of which…
Culture, especially on a remote team, is more than just having a Slack channel where people make conversation.
Culture requires effort, and often, investment.
It’s useful for both helping you attract great talent, as well as keeping that talent happy and motivated.
There have been two big culture investments that we’ve made in the last couple of years that have produced a big impact.
The first is switching much of our team (at least in the US) from 1099 contractors to full-time W2 employees. And while this comes with increased cost to the company, I’ve gotten great feedback from the team, who feel more like they’re a deep, entrenched part of the company, rather than a hired gun.
The second has been team retreats.
When it comes to building relationships, there truly is no substitute for getting together in person. Even the most highly-functioning remote teams can benefit from regular retreats. It makes those Slack conversations feel very different when you know the person behind the avatar.
4) Excellent Design
We recently spent more than $35,000 on a redesign for our brand.
And over the past few years, we’ve spent more than $500,000 on design.
Can we tie every dollar in spend back to a return? No.
But we can sure as hell feel it.
When we get emails—numbering in the hundreds—from customers like this:
… we know that focusing on design makes a difference.
Much like video, you can get design done cheap. But every time we’ve tested basic-looking designs on our site, conversions have gone down, and feedback has gotten worse.
5) A Business Coach
Last year, we hired a business coach to help us better focus on building systems and doing the right things to move Groove forward.
Good business coaches run anywhere from $1,000 to $10,000 per month or much, much more, so it wouldn’t be a cheap test.
But in three short months of working together, our team is operating on a higher level than we ever have before.
Coach has helped us:
- Set better goals for our entire team
- Establish a meeting rhythm that has massively improved our culture and communication
- Brainstorming and defining our core values
- Connect and gel better as a team
It’s easy to think of coaches and consultants as unnecessary costs. Especially when they aren’t tied directly into the types of things that startups are “supposed” to be focusing on (product, design, marketing, etc…).
But the very best business people in the world hire coaches. And even though we can’t afford Tony Robbins, investing in an experienced coach that keeps us accountable has contributed in a big way to the huge progress we’ve made over the past few months.
6) Effective Bookkeepers
Founders have to wear a lot of hats. Everyone in a startup does.
But I’ve said this before: every member of the team should be making the highest-value use of their time, always.
I’ve never seen an early-stage startup team where the highest-value use of anyone’s time was bookkeeping. It’s a no-brainer to delegate to someone who enjoys doing it, and who does it better than you.
But while I’m happy to go with the cheaper route on delegating things like online research, data entry and the like, bookkeeping is an area where I’ve found that the benefits of investing in a skilled and experienced resource has been worth it for us.
We use Lucid Books, and peace of mind isn’t the only benefit of a good bookkeeper; it helps us make better business decisions, too.
When you trust the person creating 12-month financial models for your business and you get a clear view of the future that you feel good about, it becomes a lot easier to decide which investments to make, from video to design to talent, or anything in between.
How to Apply This to Your Business
Investing in your business comes down to picking what you value most.
There are a lot of things that we value a lot less than those listed above.
When it comes to many SaaS apps for non-core functions of our business, for example, we choose the lowest-cost product that meets our needs, rather than the shiniest, most popular example.
When we travel, we choose Airbnb over hotels.
And even when we make big investments, we try to negotiate for the best possible terms (here’s how). Sometimes that doesn’t help, but sometimes it does. And it never hurts to ask.
If you’ve been holding your business back by being scared to invest, I hope that this post makes you reconsider.