I have done a lot of thinking this past weekend about what Downtown Cartel should do to ensure we survive the current economic down turn. We are in a pretty decent position right now, though we certainly have our fair share of risks. Those risks are essentially the same we started the company with so they are nothing we are not experienced dealing with. Frankly, I think this is a major point for us. We are experienced with the risks we face already and I do not foresee any new risks from this down turn. However, I have done some plan B thinking about how startups in general can survive this economic crisis and came up with a few ideas.
First, if you are building a product and have been doing it for more than six months you have probably gained some significant exeperience in the business problem you are trying to solve. If you take some time to explore how the problem and solution you have been thinking about can apply to other businesses that are not your target customer, you can probably find some decent consulting jobs to generate some extra cash. Yes, it will take away from your product development time, but it buys some runway for waiting out the down turn.
Another is option is to cut your own salary. How much do you really need to live on? If you asked me this before we started Downtown Cartel, I would have said double what I am living off of now and I have the same mortgage and car payment as I did before we started. Do you really need that venti, upside down, iced, non-fat caramel machiatto every day? Or cable TV? Or Netflix? The question is how much do you really want to make your startup succeed?
Now take that same thinking and apply it to your startup. How much do you spend on office space? Do you need fulltime office space? Could your entire company work from home and meet in your living room, a coffee shop, or something else when needed? Sell your office desks and chairs on eBay. How much are you paying for your servers? Find a cheaper host. Don’t pay for Microsoft Office when you can use Google Docs or Open Office.
If anyone else has thoughts on how startups can save money right now, please post them in the comments.
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Google Apps: Get rid of the expense and never ending maintenance of Exchange. Let Google host your mail for free or if you need the extra features $50/user/year.
Amazon Elastic Compute Cloud (EC2): This seems to be a very economical way to deploy a web application without the upfront expense of hardware and co-location.
Comment by Andy Yates — November 14, 2008 @ 11:55 pm
The VOIP wholesaler where I worked did not survive. There were various reasons but ultimately the cause was a single point of failure. A great deal of money was invested in our network infrastructure to eliminate all single points of failure. In fact, even though our office was totally destroyed by hurricane Ike, we did not drop a single call.
It was the financial storm that did us in. I do not know all the details, but it looked to me that the company was financed by a single person with a margin account based on a single stock. Even though our monthly burn rate was relatively small, there simply was nothing left after the market down turn. The company went down so fast there was not even enough left for our last pay checks. I do not believe this single point of failure was ever even considered. Ultimately it took us down the same as if we lost our primary edge router.
Comment by Andy Yates — November 14, 2008 @ 11:59 pm