Don't Let Expenses Snowball
When you buy something, you're also stuck protecting, maintaining, and supporting that product or service. You become its caretaker. And taking care of things, of course, costs more money.
- If you buy a new car, you'll need to get it insured…and washed.
- Your new clothes need tailoring and then dry cleaning.
- Your AC unit needs maintenance.
- Your dog needs to see the vet.
Expenses snowball. One expense begets another. The true cost of one object is often far greater than the initial price tag would lead you to believe.
This is an important thing to understand before a founder opens up his or her checkbook to buy something for the company. While getting a new TV for the conference room seems to balance in your checkbook, you must also factor in the cost of installation, the complementary speakers, monthly cable fees, and maintenance. The full cost of ownership might not fit into a bootstrapper's budget.
This concept applies nearly everywhere in a company. It even applies to people. If you hire a new employee, his or her salary isn't the real cost to the company. You must also factor in employment taxes, benefits, office space, and equipment, to name a few.
The trick to managing expenses while bootstrapping in the early days of a start-up is to always look around corners. Before you turn a new direction and make a purchase, peek—and think through—what's in store.
This post originally appeared on Inc.com.