Buy low sell high, everything else is an explanation or compliance

It never ceases to amaze me how many company failures are caused by forgetting this.

A great way to go bust - just give away your profits.

There have been some spectacular failures in the business world where a kind of group think effect takes over and suddenly millions are lost in the name of gaining market share – buy high, sell low – if you like.

Industry specific explanations about business are all about this same principle.

Complying with regulations is an important aspect of maintaining a ‘licence’ to operate, however, regulatory compliance is not actually your business, it’s a cost of doing business.

When you take into account the cost of goods, labor, buildings, machinery, office space, insurance, IT systems, marketing, distribution, etc. you have a pretty hefty lot of bills to pay.

I only wish it were as easy as charging your costs plus a margin – that would make life easy. However, your market likely has pricing points for the service you are offering.

So the sell high part of the equation is pretty much set for most of us. So the only part you can play with is the ‘buy low’ part. This is where as a startup you need to get creative.

The key point for most startups is cash flow.

• If renting equipment is cheaper than buying, then rent.
• When looking at office space, look at your total outgoings per year, not just the cost per square metre.
• Pay for delivery as needed until you can afford a truck and a driver.
• Focus on making sales and delivering at first. Setting up better systems and processes can come in the future as you go through a consolidation phase.
• Can you work from home and use a hire by the hour office when you need to meet clients.
• If you need to visit clients often, consider paying for a dedicated parking space, it may well be cheaper than renting an office.
• Meet clients at a local café – a lot of the time they may be happy to just get out of the office for a while.
• Use temps where you can to save on total costs.
• Can you buy an off the shelf IT system that reduces the administrative burden for your business?
• Instead of making everything yourself try buying parts from larger manufacturers who can provide economies of scale and better pricing.

You get the picture – have some fun, and keep buying low.