Most businesses start on a shoestring budget, because very few entrepreneurs have enough money to do all of the things they want to do. I understand that.
When money is tight, there's a natural (and healthy) tendency to look for ways to save a dollar here and there and do more with less. It's all about spending wisely and making good choices.
However, refusing to spend any money at all, or making choices based solely on lowest price, may damage important business relationships or deprive the business of resources required for growth.
Stop to reflect on these differences between being cheap and being frugal – and the effect of each choice.
- Frugal is occasionally inviting your best customer out for a nice glass of wine. Cheap is waiting for them to pay the bill.
- Knowing your employees will be sitting at their desks for many hours and wanting them to be comfortable, it's frugal to watch for high-quality office chairs to go on sale. Cheap is buying the rickety Ikea chair today.
- Frugal is hiring the best employee you can find to work for the salary budget you've set. Cheap is finding any person to do the work for the least amount of money you can spend.
- To enjoy volume rates, it's frugal to negotiate with an existing vendor to buy more of what they sell over time. Everyone wins. Cheap is constantly threatening to switch vendors based on lowest price.
- Frugal is charging your customer a portion of the budget overage. Cheap is charging for every nickel.
- Frugal is negotiating a better rate with the logo designer you really want to work with. Cheap is asking your unemployed brother-in-law to design it for you.
If frugal is about maximizing value for the money spent, then cheap wants to avoid any spending at all. There's a place for both in your business as long as you understand the implications.