TL;DR; Living in a scarcity model does not means avoiding spending money at all costs - especially when those costs are high.

Introduction

A month ago, I did describe startups (ours included) as Slum Economies, essentially due to resource scarcity. I’m now taking the reverse approach, by taking a look at what we are basically paying for, most often gladly. Taking a look at our expenses, I can roughly split them in two categories: those we pay because we cannot meet them ourselves, and those we pay because it would be inefficient to do so (in addition to those you cannot avoid - like taxes).

Services we cannot meet

The formula

Even trying to be economic, there are some expenses we just can’t afford not to make, because they are both critical to our business and impossible for us to do. In this kind, the economy part just means paying a fair price, as long as you have the service level you need (not everything is a commodity, as my example will show).

Not being able to do those tasks yourself does not means you should not learn some part, as you’ll want a healthy dis

cussion with the professional you are hiring.

Some examples

Lawyer: This is for me the best example of “cannot ignore” expense. We’re building a business, with a lot of legal or at least contractual aspects. We cannot expect putting up a correct contract or terms of services or licence by ourselves. We found our lawyer very early in the process, and it is a post that is both expansive and well spent.

Accountant: This be could almost go in the next category. Except that accounting, as all legal matter, is often incredibly complex to do it right - you may be able to get it correct with time and sweat,

English: Banner from an advertisement for a an...

but it takes very few for the accountant to pay for himself, by making you pay less in taxes.

Graphic designer: As stated already, Christophe and I are first and foremost programmers. While not stranger to UI and UX (and being helped with good lectures), we realize one thing: graphic designer is a job. Not a skill in the portfolio of programmers. Speaking with one last week about our website made this clear once more.

Services we cannot meet efficiently

The formula

This one is very much linked to a basic formula: find how much you could charge for one hour of work, using your best merchandisable skills. Let's call this E. Now, the rule becomes quite simple: for all tasks, take a look at how much time they would take you. Let's call this T. Now, if you find someone able to deliver the same result for less than T*E, you should pay. If not, you should do it yourself.

In other words: it is not because you can do it yourself that it is a good idea to do so. You want to concentrate on your key activities, so everything other you can outsource is welcome. In our situation, we identify our two keys activities:

  • Customer Development: we need to research and learn about our customers
  • Development: we’re creating Sybil, a software

Some examples


github kitty
Photo credit: tachikoma

 

 

Hosting: We do not host our code (we use GitHub), we host our blog, but want a way out. We found a way not hosting our wiki. And, still, Christophe has a system administrator background, so he’s more than able to do this kind of things. It does not change anything. Take GitHub as example: it costs us 25$ per month. In IT, it is probably worth less than half an hour. It is just not worth doing it yourself (even supposing that we could install something with the same features as GitHub). Just doing the basics (e.g. little administration, one update once in a while) would make it a money losing activity. And I won’t ever start talking about the inevitable problem that will show up at one time.

Consultancy firm: As bootstrappers, we’re making money by doing consultancy work in major IT firm. We could do that by ourselves, picking the phone and answering offers. We don’t. We work with a partner that finds us missions. Even without all the positive sides of this relationship (interaction, network, etc.), it would still be a good move: we have better thing to do, and would be far less efficient that they are to find mission. We build a network around our product activity, which is not the same.

Google Apps: Google Apps (Google offer for Business) is just too good to be real, in a basic buck-for-value formula: for 6€ per month, we got unlimited (at our size) space for documents with incredible collaboration features, mails with our own domain as extension, and a slew of other services. Once more, we could manage this with a combination of free software and offers. But what’s the point? If I take one hour to search for alternatives, it will already be more costly than the annual pay.

Conclusion

In a way, this is just a part of the global “Get help, do not try to do this alone” advice to young (well, new) entrepreneurs. We found ourselves glad to pay for efficient and professional service.

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