Work Hard. Spend harder. The culture of the startup, fast growth environment is adrenaline fueled. The need for speed affects all areas of the business, including company spend. Funded start-ups are under insane pressure to demonstrate continuous return on investment, and quickly. This type of pressure in an already 24/7 “make it happen” now environment means that often, spend control goes out the window. No one has time to scrutinise the figures, and everything should have been delivered yesterday. Challenging a start up founder about a business case (if there is such a thing) is not for the faint of heart.
The reality behind fast-growth often translates into buying sprees, an increase in costly expert labour and all sorts of expenses. The pressure is on to deliver new initiatives whilst they are still in development. The push to be agile and responsive means that business changes are made whilst in full flight.Huge investments made in one initiative may need to be pulled or maneuvered to another area. That’s the nature of the beast.
At some point however, someone will review the figures. And freak out. This seems to be what has happened at WeWork. CEO Adam Neumann has called on staff to “manage the nickel“. Gone are the breakfast of salmon, eggs, bagels and yogurt provided to staff at meetings.
This is the classic knee jerk reaction. Cut back on expenses. Rediscover the joys of living frugally. And recycling the staff room coffee grinds. Really, what is a start-up speed junkie to do? A few practical tips:
- It may seem obvious, but you’d be surprised how few companies have full spend visibility: Know What You Are Spending Your Money On.
- Identify your top 20% of suppliers. Who are they? What your spending on with them? Why?
- Tip: check your spend in the following spend categories: Contract and Consulting staff. Travel. Technology. Property & Maintenance.
- When the pressure is on to deliver, assign someone a role to guard the company purse. Who is NOT your CFO. In big organisations, you’d have a whole procurement team to do this. If you’re starting out, you need a spend control/reality check/”sane person not easily influenced by other people’s adrenaline but who understands commercial reality”. The role of procurement and the CFO whilst linked, is separate for a myriad of reasons I won’t go into here. But trust me, you do not want a bean counter to head your procurement.
If the above fails, you can always get your staff to wear a “Pavlok” shock wristwatch. When they overspend their assigned expenses, they are gently electrocuted into line. Funnily enough, the backers to this invention, are WeWork… I wonder why that wasn’t introduced straight-up as part of the Manage the Nickel Strategy?