As a business owner, running out of cash is among your worst nightmares, and rightfully so since businesses need money to survive.
Unfortunately, money doesn’t solve all your challenges as an entrepreneur. Inefficient and corrupt companies with big bank accounts have a tendency to find ways to fail. There is no amount of money that will allow a business to overcome a dying business model or products that no customer finds to be valuable. These are problems that are solved by innovation, not cash.
Money is too frequently used as a quick fix. Need to get your brand noticed? Hire a brand manager or spend money on advertising. Need some sales? Hire a salesman or take out an ad in a magazine. Need to organize files? Purchase some software from a local retail store.
Instead of finding the best solution or innovating to create a better solution to a problem a business is facing, money, if it’s available, is thrown at the problem. It’s used to find the best available solution that appears to be the right fit.
But what if having more cash available was a limitation, not an advantage? Amazon Founder and CEO Jeff Bezos said, “I think frugality drives innovation, just like other constraints do. One of the only ways to get out of a tight box is to invent your way out.”
As the Interview Editor for Under30CEO for two years, I interviewed well over 50 young entrepreneurs, most of which created unique and extremely profitable businesses. One of the most common themes among them was that the early months and years of their business was a “struggle” because of a lack of funding. But, instead of this being a disadvantage, it became one of their strongest competitive advantages. They were forced to invent creative solutions to problems that other companies used money to solve. Their creative solutions often turned out to be far better than what they could’ve purchased had the money been available at the time.
For example, imagine that you’re starting a fast food restaurant with limited funds. You’ll need to compete with the local McDonald’s and Burger King. Since you can’t afford to build a large location with a full drive-thru, which you would do if you had the money, you have to find other ways to creatively get your food into the hands of consumers on the go. After trying a few different things, you discover that having a couple of food carts outside of the local college will bring in sales you’re missing by not having a drive-thru. This turns out to be a competitive advantage for your business. This solution is not something you would have ever come up with if not for being forced to find other options to increase sales.
Putting Concept into Practice
Whether your business is flush with cash or on its last dollar, finding ways to increase efficiency and lower costs through innovation should always be welcomed with open arms. Before looking at your expenses, you should look at areas of your company that aren’t operating as well as you think they should be. Where is your money being wasted?
In these areas, work with your team or develop a strategy yourself (if you’re a solopreneur) on how you can increase the value you provide or decrease inefficiencies in these areas while keeping costs the same or decreasing costs.
Notice that I didn’t say “cut back” or “cut costs.” Cutting costs means going with a cheaper option that exists in the market, and is often to the detriment of your business. You want to find improvements that are less expensive.
What can you improve in your business while cutting costs?