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The 10th Man’s Jared Dillian recently offered some perspective on two statements regarding personal finance that can also be applied to the health of your small business:

  1. You should save until it hurts.
  2. Money is meant to be enjoyed.

He takes these opposing, yet truthful statements, and identifies two extreme spending habits: the CFs (we’ll call them Cheap Friends, ha) and High Rollers. Neither is truly bad, depending on your actual financial wellbeing. For example, enjoying a more lavish lifestyle and spending freely when you don’t have anything in savings doesn’t make sense for your actual financial situation. And the other rings true as well, if you have seven figures saved, yet you’re still painstakingly cutting corners to save money, you’re not truly enjoying the fruits of your labor. While such centrism is detrimental, balance between the two is where your business can find the sweet spot.

In the beginning of your new business, it’s important to be a CF and bootstrap while you’re refining your product or service. As income improves you can evaluate the parts of you business that are not within your skill set, and contract them to a dedicated professional, like marketing, accounting, or administrative tasks. However, clinging to either disposition for too long can cause undue stress.

For example, if you’re prone to high roller tendencies, you might jump in to spending money on help before you can afford it, or paying for software that’s more than needed, or equipment for the office, or even rent. Instead, it would be advantageous to tame your spending and consider cheaper alternatives, such as video conference meetings, instead of travel, where possible or working from the kitchen table or coffee shop rather than paying rent. You also need to continually review monthly services that you may have signed up for, are still paying, but not using.
If you are more accurately a CF, you may try to continue doing too much for too long that’s outside your wheelhouse, and sacrifice focus you could be putting towards your product/service or client. If you work on an old computer, instead of buying a new one, you could end up wasting hours every week on efficiency or dealing with problems.
We couldn’t agree more that it’s all about balance. When you’re just starting up, save. When you are more established and bringing in a steady earning, spend the money needed to get you even further ahead.