There are three things that are crucial when starting a company: selling, selling and selling. OK, actually, there are four things. Cash flow is king, too. As I write this the Dow is down nearly 3000 points over a 4-week period, the commercial paper and interbank loan market have completely dried up, and it’s getting harder and harder to borrow money. The bottom line is businesses need to do everything they can to make the money they do have go further.
When we started out, the one thing we focused on was our “time to expiry” — the amount of time that we had until we would be insolvent without winning any more business. It’s simple: add the money coming into the company (sales), and subtract the money going out (salaries, office space, etc.) and plot that over time. At some point in the future, the graph will drop below zero. If you reach that point, without any more sales, it means you’re out of cash.
Focus religiously on this event horizon. There are two ways to push back the zero date. Sell more stuff, and reduce your costs. This article is about our experience with the latter. I could start talking about the former, but you’d have to pay me.
Obelix!
When we finally grew large enough to be able to afford our own office, we spent a while looking for a decent, cheap, expandable phone system. We didn’t, and still don’t, trust VoIP as a 99.9% reliable service, so we were set on some sort of switch connected to a few ISDN lines.
I couldn’t believe the quotes we were getting from suppliers. Many, many thousands of pounds for a simple switch that connects phones to ISDN lines. You want to add another 16 phones? That’ll be another £3000! You want to store the call data in a database? £2000, please. Oh, and the phones cost a fortune, too.
Then I heard about Asterisk. Asterisk is a Linux-based open source software stack that can drive any number of ISDN cards that are available. OK, the cards are about £500, but we had a spare PC lying around and Linux is pretty cheap! Some hacking around later (OK, OK, about two days‘ of hacking!) and we had a working setup using VoIP internally, which is then bridged to ISDN lines when calls go into or out of the office.
The phones we use are £70 a throw, so in total we managed to save about £3500 right off the bat. Then there’s the saving in cabling: we only need one network in our office. Adding phones just costs us the price of a new phone, not £3000 for an add-on to a proprietary system. Finally, we have a system that we actually understand, so we never need to call an engineer to change a dial plan or add some phones; we just SSH into the asterisk box and fire up vi. We have voicemail as email attachments, conference calling, “intelligent” call forwarding, group pickup, call logging, etc. It’s all there — Asterisk is just great.
Office space
OK, you want to sign a 2-year office lease to get the best possible space, but you know you won’t be able to either fill the office or afford the rent for the first 12 months. The solution? Sub-let.
Stick an ad up on Craigslist (or Gumtree if you’re in London, like us) for the desk space, charge by the month and wait about 4 weeks. By then your office will be full and you will be getting extra money in to cover the rent.
Just make sure you check with the landlord of the property that you are legally allowed to sub-let or even better have it written into the contract. We actually had a better response for desks than we initially imagined, meaning we got to pick and choose our desk neighbors. The selection criteria boiled down to two things: do we get on, and can we potentially work together on projects? It’s very useful to have a top-notch bunch of Flash developers downstairs that we could use to complement our current skill set.
Decamp
Basecamp is very successful and rightly so, it’s an extremely good project management tool. However, you can get a very, very similar application at a £0/month price plan. Project Pier is fork of another project that was open source but has since gone the paid-for route. The project isn’t very actively developed, but it’s more than good enough to satisfy a large proportion of what you get with Basecamp.
Manage your own email
If you have someone in the company who understands what postfix, snmpd, smtp, httpd and sshd are, and you’re already paying for server hardware infrastructure, don’t bother paying someone else to do your email hosting. Run it internally. Get your Linux geek to do all that server management stuff. Consider whether you really need push email. Surely getting your email every 15 minutes is good enough, right? If so, dump the Blackberry/ActiveSync phone with the pricey license fees, and go IMAP. It’s open and it’s free.
Who said spam?
Like I just mentioned, we run our own SMTP server. Slowly, predictably, our email addresses started attracting spam. There are a load of companies out there that will filter your email for a pretty penny, but don’t call them. Just download ASSP, spend a day playing with it and away you go. We’ve gone from more than 200 spam messages per mailbox per day to about one per day, with no false positives.
Free banking
OK, I admit it, right now I hate my bank. Their service is far from ideal, but they don’t charge us a penny for running the account, paying checks in, or calling them. Anything that can reduce the pressure on your cash-flow is a good thing, and free banking, warts and all, is a good choice for a start-up. It pays to shop around and see which banks offer free business banking. Also watch out for teaser offers: some banks offer free banking for a year, but you have to pay for things (like giving them money! Crazy, huh?) after that. You plan to stay in business for more than one year, right?
VirtualBox
We write web applications, which means we spend a lot of time testing web applications. Testing across browsers and O/S versions used to be very painful, but with the advent of virtualisation software it means you can test across systems without getting out of your seat. We used to use VMWare, which did its job, but the open source VirtualBox is just as good, and has a much better price point: free!
Server said what?
We run a number of servers for our clients, and it’s important to be able to keep tabs on them. Their bandwidth usage, memory usage, what they’re having for dinner, that sort of thing. Cacti is an SNMP-based tool that just plain rocks. It runs as a web application, monitoring other servers in the background. It records all their data points, and allows you to view all sorts of metrics through the web front end. SNMP clients are free under Linux, but you can pay big bucks for commercial management tools. Cacti does the job for general web serving just fine.
Of course, every now and then things do go wrong. When they do it’s important that you know about it before your client does. Nagios does the job of server monitoring really well. (Just remember to use different infrastructure for your Nagios server, otherwise you’ll have a hard time being alerted of your network going down if Nagios is on the very same network!)
Colleague said what?
Don’t waste money on something like Campfire; just compile an IRC daemon and run that. Old Skool! You can’t easily post and share images and documents like you can on Campfire, but you can get a long way with ASCII art…OK, so maybe this one is a bit of a stretch.
He’s no longer the Richest Man in the World
Seriously, don’t bother with Microsoft Office, the beta releases of OpenOffice 3 are top notch. It handles the new Office Open XML standard perfectly well, and can export to PDF in a single click. The OSX version is really, really good too. In fact, it’s helping me write this!
For all you cloud-lovers, there’s a number of collaborative solutions like Google Docs, Zoho Writer and a cool Flash-based application, Acrobat Buzzword.
Squash those bugs
Bugzilla always seemed like overkill for projects with less than 10000 issues. We ran the company for about four years with Mantis, which did the job admirably. It’s free, simple to use, easy to set-up and does the job just fine.
Being totally honest, though, a while ago we splashed out on JIRA. Although it goes against the grain of this article, I believe that you need to spend your hard-earned cash when it really is necessary (more on this a bit later). Our clients can communicate with JIRA via email, the permissioning is much more powerful and the application itself is far more extensible. I think JIRA is worth every penny; it’s brilliant.
Patch that code
In terms of managing your code, Subversion and Git both solve similar problems in different ways, but they are both free and just as good as any paid-for product.
Spend spend spend!
While it’s a good idea to cut costs where you can, there are a few things we think you should spend that little bit extra on. Things that make the work environment more enjoyable for employees, increase productivity and reduce overall business risk are what I feel it’s worth spending some extra money on, like:
- Chairs
- Physical office security
- Off site backup
- Coffee (oh, and get a stainless steel cafetiere. Glass ones have a mean lifetime of around 10 weeks!)
- Monitors
- The odd night out on the town; a great way to team-build. Recommended venues: Ice Skating by the Tower of London or Urban Golf
- A Wii. A great way to de-stress and an excellent excuse for a 10 minute break. Recommended vices: Wii Tennis, Mario Kart and Super Smash Bros.
What’s worked for you?
In this article I’ve beeen through a few of the ways that we’ve reduced our business costs, primarily by using free software, but if you have any tips (either ways you’ve reduced your business costs or things that it’s worth splashing the cash on), please share them in the comments.
If you liked this article, check out Ben’s other Vitamin article: Easy Automated Web Application Testing with Hudson and Selenium
Nice list. Here are a couple of things we’re using that are not on your lists:
Email
Use Google Apps for Business [http://www.google.com/apps/intl/en/business/index.html]. Even if you know how to roll your own smtp server it is much better to have Google’s team and infrastructure looking after things for you (and it’s free).
The only downside to using Google Mail for a startup (especially if you’re hosting in the cloud) is when you want to send email from your application. Google have limits in place that become prohibitive after a short while if you are automatically sending a lot of mail. We signed up for a slice at slicehost.com which costs $20/month and we use that for our application outbound email. This is highly recommended and you can also use the slice to host your company blog if you wish.
Spam
Google’s spam filter is second to none.
Bugs
We highly recommend TRAC [http://trac.edgewall.org/], and it’s free.
We use GoHello.com, that is even better, cheap as hell, no tedious hardware installations, GSM netvork, round robins, software interface etc.
We have the samme telco provider so we call for free over cellphone.
I use chatterous.com for our chat needs. You can communicate using the web, email, sms, or jabber to interact with the chat room. Best of all, its free!
Remember, with all this free stuff.. this “Get your Linux geek to do all that server management stuff. ” attitude will probably cause your linux geek to quit within the year.
Hire a real server admin, not a developer who knows a lot about linux. Unless you clearly define what you want to add to their job, and they agree/understand, they will quit on you. There is probably a reason as to why they are a developer and not an admin.
“Get your Linux geek to do all that server management stuff” to run your own mailserver, why? Spending a few dollars a month on a hosting package or using GMail certainly saves a lot of hassle. Even if you have a Linux Geek around the office he should probably do more usefull things with his time than deal with mail servers.
As free tools go all things google are very good. GMail for mail and Google App Engine for development and deployment of apps saves a lot of money.
I like AJAXChat (It’s Free).
A couple of your items can be resolved at once by using Zimbra for your email server. The free, OSS version of Zimbra handles IMAP email (with push IMAP, and it works well, even on my iPod Touch), instant messaging (Jabber), calendaring, shared calendars, server-side file storage with WebDAV access, and collaborative documents.
You can install it on several kinds of Linux, and it’s fairly easy to keep updated. You do have to put a couple of days into it if you want automated nightly backups, or getting it to run along side other web-based services.
And they have a fantastic web-based client for all of this. Many people stop using heavyweight clients altogether (not me, I still use Mail and iCal).
If you need blackberry or activesync features, you can always upgrade at a later point without affecting your installation, too.
(Note: I don’t work for Zimbra, just like the product.)
Learn how to hose your own git and ditch github except for open source
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I use http://crossbrowsertesting.com for my browser testing. They have lots of setups and it is free if you can do your testing quick.
Some good tips on saving money Ben.
Open Source software is great, but I have to admit as a web designer I often prefer apps that are graphically appealing. e.g. OpenOffice and ProjectPier look like decent alternatives to Microsoft Office and Basecamp but I’ll still use the later just because I prefer the way they look. But at least it’s good to know they’re there for when the money isn’t.
I got some good feedback for a recent article on Mac apps with a lot of recommended OSS that may be useful
What a superb article!
heres my recommendation that goes beyond the above (btw theres a bascampesque skin for project pier that is vnice!
http://markrushworth.com/template_permalink.asp?id=262
I’m seeing lots of options for campfire alternatives, so I’ll throw one out there as well: 24im (yup, free).
You Don’t Need an Exchange Server
Use one of the free scheduling services available, like TimeBridge.com.
It also allows you to share you calendar with colleagues.
Thank you.
Some of the things here I did know about but the insight into phones, virtual servers and bug tracking - I didn’t.
More of this - thank you!
If you want independent advice on how to manage your own email or anything your Linux geek might be interested in check out www.server-management.co.uk
Other cost-saving tips:
1) Out-source all your IT. Let’s face, a few skilled IT people with good systems in place can manage hundreds of servers; what’s the point of paying an expensive salary for someone to manage servers in-house when you can get better managed servers with a faster connection by leasing from someone else? I’m working with http://enkiconsulting.net and they are a great grid hosting provider.
2) Google Apps and GMail - the UI and spam protected are top notch! I also use AuthSMTP for sending email since it’s more reliable than gmail’s SMTP server and very affordable. Don’t run your own SMTP server - the cost in wages will exceed the savings quite shortly!
3) I’d definitely suggest TRAC over Mantis, JIRA, or anything else I’ve ever used. You can get hosted Trac in Europe or the US and save hours (and thus hundreds of dollars in wages) of setup and configuration time.
4) Take on some of your own bookkeeping; instead of forwarding your receipts and invoices to a book keeper, find an easy to use online accounting system that allows you to enter the books yourself - maybe http://www.clarityaccounting.com or http://www.freshbooks.com or one of the many other online solutions
5) Why save on office rent when you could forego an office altogether? If you have employees, let them work out of your garage (or each other’s garages if you can divide them into teams). Hire remote contractors, work from home yourself.
6) In disagreement with some of the tips above, I’d generally suggest avoiding rolling your own until you’ve done the math = i.e. setup time X employee wages
Nice article. As an entrepreneur myself, I’m always looking for way to cut costs. Thought I might plug my own app for business while I’m at it:)
Check out http://gobootstrap.com for a free web based bookkeeping solution. Currently ideal for service based sole props but we’re adding new features every day.
I have to echo the Freshbooks comment. They are great for billing.
For an alternative to bloated Dreamweaver I use a shareware that is top notch called skEdit.
for very cheap printed marketing materials I use vistaprint.co.uk . the quality isn’t superb but I set up www.kapow.me with voucher cards, business cards and postcards + a few t-shirts and a rubber stamp which we use to customise the packaging and letterheads for under £45 then we just wait for (the far to frequent) offer from vistaprint for FREE BUSINESS CARDS and we just re-order.
john c
I want to throw in a plug for collabtive. its and opensource version of basecamp. Very nice.
http://collabtive.o-dyn.de/
Ok Mantis is a free BTS, but what is not free in Bugzilla?
Bugzilla is quite easy (as in really easy!) to set up, and is really nice to work with (even with less than 10000).
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On the office space front, as I have been looking, wait…
The prices here in Dublin are falling like stones and why get tied in right now to a long lease?
These are great ideas for someone running a small business and trying to keep their cost down.
For an alternative to Campfire which is both open source and web-based, check out EchoWaves ( http://www.echowaves.com/ ).
Tried it out the other week, and was blown away. Sure beats hosting your own irc :)
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Because simplification of process can save time and money, I recommend http://www.freshbooks.com to manage the estimating/invoicing/payment of your accounts. It’s really user-oriented so clients like it and I’ve noticed my whole process is much smoother and clearer, with great record-keeping. I use the iphone app and love it.
I’d imagine an IRC daemon is a little too old skool for most people. A Jabber server is free and supports chat rooms.