How I Spent A Million Bucks And Ended Up With These Two Chairs.

Posted on May 12, 2009 - 7:00 AM PST

 



I want to tell you this story of how I foolishly spent a million bucks so you can save yourself from making a similar mistake.

In the early 90′s, I was running a profitable business, we were doing several million dollars a year in sales and profits and I said, “I need an office space that will communicate to people that I’m finally important in the world.”

Spending too much

My co-founder and I looked all around Manhattan and found this floor of office space in midtown. It was a beautiful, functional space, but it was a FLOOR of office space, and if you know anything about Manhattan real estate, you know that it’s expensive.

So after I got an expensive office, what did I do? Well I figured I can’t put shoddy furniture in there, so I went out and bought furniture that was top of the line, spent a million dollars on furniture. I remember telling the architect who designed our office–can you imagine THAT waste, we had an architect–I told him, I need space that looks so good that people will forget that I’m in my twenties. I need to communicate strength, and isn’t the way to communicate strength to pay for office furniture, to pay for a big office, that lets people know how important you are?

Well, of course the answer is “no.”

Learning my lesson

When times got rough, I couldn’t fill up my office space, and I ended up with not just a floor office space but a floor of office furniture that couldn’t be used. My CFO–I had a great Chief Financial Officer at the time–found a way to not just sublet the office space, found a new tenant for it, but also found a customer for all the office furniture. And the day we moved out of the office, he said, “Andrew, all the expensive furniture is gone except for these two seats.” (See them in the included video.) He said, “I want you to keep these two seats as a reminder to never spend lavishly again.”

I took them into my home in Manhattan, and they are pretty much the only things, that I’ve kept over the years. They’re here in my place in Santa Monica, and I kept them as a reminder to never spend lavishly.

Why I’m telling you this

Now why am I telling you this? Because since selling the business I’ve been talking to entrepreneurs and business people all over and what they want always want to know is how to get funding and revenue. I have to tell you that those are interesting subjects, but it may be more important to know how to keep your costs in check. If you don’t know how to do that, all the funding in the world is going to get burned. But if you DO know how to do keep your costs down, you’re going to be able to run a lean operation and you may not even need funding.

So that’s why I’m telling you this, and it’s not just my own experience.

Learn from top entrepreneurs

Top entrepreneurs know this.

Richard Branson In order to get publicity for his company cheaply, he started doing balloon rides around the world and taking all kinds of risks with his life. I believe it was to keep his promotion costs low.

Harry Helmsley He laned a career in real state, but graduated right in the depression. He quickly saw that he couldn’t buy buildings, but was smart enough to realize that he could control building for less money if he managed them. A lot of people think he owned the Empire State Building. He didn’t. Owning the management rights was cheaper and more profitable for him.

Warren Buffett He’s one of the richest men in the world–I think his license plate says “Thrifty.” I went to one of his shareholder meetings where the jokes about how cheap Warren Buffett is were flowing just as much as the financial conversation. That shows you how much a part of his character thriftiness is.

J.P. Getty. He was the richest man of his time. He was an oil man, and he was so proud of how cheap he was that at the end of every day he would write down everything that he spent money on, from the sandwich to an oil rig. He found it that it helped him stay financially accountable to himself.

The takeaway

That’s how important saving money is in business. I forgot that at one point in my business career. I see a lot of entrepreneurs who seem to forget it. I want to keep reminding you that yes, profits are important, getting funding is also important, but keeping costs low might be just as important as both of those.

I want to keep emphasizing that point, not just here, but also in my interviews. And if you’ve been watching my interviews, you hear me ask people, “Where are you living? What are you spending money on?”Because I do my interviews by video chat, maybe you see me looking behind the interviewee to see what their office space is like and how much money they spend on their office space. There’s a reason for it, because I think it’s just as important to find out about how they keep they’re costs low as it is to learn about what they’re doing to grow their businesses.

Suggested comments

  • Did you ever make a similar mistake?
  • Is sharing my business experiences helpful?
  • Do you agree with my point on thrift?
  • This posts’s text was transcribed from my video. See any errors?
  • http://www.chrisbrisson.com/ chris brisson

    Great story dude. Soooo true.

    Best skill to have:

    “Delay gratification.”

    Keep the awesome posts coming :)

    - Chris

  • http://mixergy.com AndrewWarner

    Thanks Sankar. Little points like this are very meaningful in business.

  • http://mixergy.com AndrewWarner

    Yeah. Delaying gratification is one of the most important entrepreneurial
    and life skills.

    That, plus the ability to trust that the gratification will come in the
    future.

  • http://www.ventnation.com/ Alex

    My parents are in the office furniture business, its a good business to be in office furniture is very exspensive .Lol ..My dad is the same way, he writes down every last cent he spends a day, but thats why he is a sucessful business man. great post!!

  • rhondaknativefloridafolkartist

    I find your point on thrift very very instructive this day. I need to focus on personal accountability. I loved how you shared this. I was searching for information on vanity statistics versus actionable metrics and found this.

    In the big picture, maybe it was what I really needed to look at.

    And those two chairs.

  • http://mixergy.com AndrewWarner

    I've tried writing it all down. It's a lot of work. But it really does keep
    me disciplined, when I do it.

    Thanks for the comment Alex!

  • http://mixergy.com AndrewWarner

    Having those two chairs is a good reminder for me too.

    Thanks for the note!

  • Christel

    Oh. My. G-d.

    I can't believe you have those f'ing chairs.

  • http://mixergy.com AndrewWarner

    I'm surprised you remember the chairs. Do you remember when we bought all
    the furniture?

    Out of all the furniture in the office, I think those two chairs are the
    only things that I liked. If Rich saved the couch for me, I probably would
    have gotten rid of it by now. But these two chairs look great and they're a
    good reminder for me.

  • http://mixergy.com AndrewWarner

    I do remember all that purchasing, it seemed to take forever to go through choice after ugly, expensive choice.

    I think in general the person who led that project was a little more comfortable spending money than was typical in the startup culture you were developing and I seem to recall it getting pretty exhausting for you to have to be checking on everything and debating every purchase, not to mention how hard it was to sell yourself as the voice of reason when you'd never had to make those types of decisions before.

    ________________________________

  • Christel

    I do remember all that purchasing, it seemed to take forever to go through choice after ugly, expensive choice.

    I think in general the person who led that project was a little more comfortable spending money than was typical in the startup culture you were developing and I seem to recall it getting pretty exhausting for you to have to be checking on everything and debating every purchase, not to mention how hard it was to sell yourself as the voice of reason when you'd never had to make those types of decisions before.

  • amanda

    I bought 60 cupcakes from Costco and had to throw them away.

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  • G_Efstratiadis

    I've watched this story over and over again… its so valuable information! It's a great REMINDED!!
    A quick question that came up though. You spent $1.000.000 and then you sold them all (but hte 2 chairs). What was your total lo$$ on that ?

  • G_Efstratiadis

    I've watched this story over and over again… its so valuable information! It's a great REMINDER!!
    A quick question that came up though. You spent $1.000.000 and then you sold them all (but hte 2 chairs). What was your total lo$$ on that ?

  • http://www.lincolnYPG.com/ Kevin Hagemoser

    Brandon – your post is great, thought inspiring.

    Spending money on acquiring traffic has value if you are trying to build for a certain type of business exit. I'm not suggesting the early 2000 dot.com mentality revival but right now – some statistics can be better “sold” to certain buyers.

    imagine – a Red shiny Corvette with curb appeal but a leak in the transmission which makes it incapable of working over the long term versus a Mercury Sable with a dent but in condition to transport the driver for more than the distance and time required – some types of buyers will ignore all the info and still go with the shiny Corvette and some will even pay a premium.

    Lesson here, know the reason you are in business and understand if you are attempting to sell captured value to a business buyer or build revenue and value for your firm from the end consumer.

  • http://www.sleepysheepbedding.com/ Chelsea

    Really cool article. My fiance and I have a great business selling wool bedding online. We decided not to open a retail location, and instead focus our money and time on expanding our reach online and in the local community, and I have to say it is a huge relief to be able to spend time with my daughter after school, and out in the community, rather than sitting in a storefront all day. And so much less stressful!

  • gualbertoalarcon

    That example of the spending,aplies to a whole country called Venezuela.
    It has being spending all the incomes in lavish and political projects, and making the mistake of no-saving for the future.
    In short, the Gross Income of the Country its about 80 billions per year and no Invesments in new Industries and Agriculture.

    You dont need to be a PHD ,to understand that at the end ,the country will not have any savings and a decent Infraestructure.

  • http://kevinchiu.org Kevin Chiu

    Do you have pictures of your old lavish office space?

  • rogerv

    Andrew I'd love to see a book of CEO's most expensive mistakes ever. Personally, and this was only $100k or so (ha ha… vs. your millions), my #1 mistake was underestimating or not accounting for the cost of client acquisition.

    I used to run Toonshoppe, a company I was trying to build into Pixar, but I was too much of an artist, not enough of a sales / business man and wasn't smart enough at the time to hire someone who was. Anyway, it was a fun ride but in the end…left me with about two chairs too.

  • http://www.audiomicro.com/ Ryan Born

    totally amazing story Andrew…you were really thinking big but had to learn a lesson…Neil too is a pretty thrifty guy (Tina's Day Care, etc.)…you guys seem to think alike a lot of the time…thanks for the book recs as well

  • http://www.1zero1.net/ Mike

    Just watched your video and read the post! I'm going through a similar process now and I recognized the fact I was going down that road but in the end I found what got me into trouble was just not being able to say “no”. No to high priced cars, dinners, lunch, latte's, gadgets, and in the end…. stuff. I've got loads of stuff. Too much stuff!!

    I spent 3 weeks in China on business in 2007. I remember getting by on clothes from a suitcase, a single laptop computer, a bookbag/briefcase, and a taxi now and then. I never once missed the “stuff”. But once you come back to it, the “stuff” seems important again!

    Two chairs and my books. I should be so lucky lol!

    Any events coming up in SoCal?

  • http://www.ratebrain.com/ RateBrain

    Thanks very much for the reminder! It's very easy to spend money, especially as costs for services come down. It's important to think about what (a) your company REALLY needs, and (b) will this thing you are spending on really move the needle??? We're trying our best to keep costs down at RateBrain, but it's a daily challenge :)

  • ArtInsightTV

    How can we inspire people to take pride in their thriftiness rather than be ashamed of it? This video is a great start. Thanks.

  • http://mixergy.com AndrewWarner

    I saw your site. Interesting business. Whenever you're ready, I'd love to
    hear more about your business by email.
    I'm curious about your goals with it. Revenue model. PR ideas. Anything.

  • http://mixergy.com AndrewWarner

    Good point. As a kid, dreaming about being in business, I fantasized about
    the view from my office. I'm smart enough now to realize that it's about
    what we create in the office not see out the office window.

  • briteguy

    Watched this video several times.

    It reminds me about my career also as a software engineer. Even though I was not starting up my own company, but I used to like spending a lot. But then the economy turns south and I regretted that I should have saved money to battle the unemployment etc.

    So, I think this video is not only useful for startups, but also for professionals too.

    I am trying to build my website these days as a startup practice, still not successful yet. But this video teaches me an important point about running the website, keep the cost low so that the website could last longer (I am paying out of my pocket, no outside funding and no profit yet)

  • briteguy

    Watched this video several times.

    It reminds me about my career also as a software engineer. Even though I was not starting up my own company, but I used to like spending a lot. But then the economy turns south and I regretted that I should have saved money to battle the unemployment etc.

    So, I think this video is not only useful for startups, but also for professionals too.

    I am trying to build my website these days as a startup practice, still not successful yet. But this video teaches me an important point about running the website, keep the cost low so that the website could last longer (I am paying out of my pocket, no outside funding and no profit yet)

  • dalebotha

    Sharing your business experience is very valuable. You might run the show but also have so much info to impart!

    Can I suggest you get someone you trust, who is ALSO passionate about educating entrepreneurs, to interview you in the same way you interview others. That would be cool!

    Warm Regards, Dale

  • jewishguy

    spazz

  • beyourbest

    Well sharing your experiences is always good – though I suspect you live on a different planet to me :-)

    Andrew – i TOTALLY agree on keeping a business lean but I'm not keen on the “personal” thrift examples – cause If that's what 'rich' people turn out like – i sure don't want to be 'rich' like that.

    I believe in generosity & kind heartedness, even if all you can afford to give away is a smile – give that.

    BTW – JP Getty was supposed to be a truly awful person – not a legacy i'd like to leave.

    Interesting blog post – first i've read
    Rich

  • http://twitter.com/highballsport Highball Blog

    I agree with you Andrew and I believe this is what differentiates entrepreneurs from the rest of the crowd – living simple (sometimes cheap) and concentrating on creating value rather than spending.

    Most people see top entrepreneurs as guys who can BUY anything they want, so they believe spending lavishly is the ultimate pleasure when in fact this is so not true. I think doing things right and serving people along with the feeling of mastering your own life is what drives entrepreneurs. Big sums of money and spending come as byproducts.

    Cheers!

  • http://twitter.com/highballsport Highball Blog

    How big was your office space? In square feet?
    You can buy a few houses with $1 mil so I cannot imagine how much furniture you had.
    Let's say the two chairs represented 1% of all the furniture and let's say the cost was proportional – that is $10,000.
    Since you were running an online business I don't see the need for such opulence.

    I know from my experience that running an online business requires investment in online appearance more than anything else.

    I'm just baffled by the amount of money you dedicated to offline embellishments.

  • scir91_from_YouTube

    Andrew is right, it is about avoiding wasteful spending and finding VALUE in spending, in other words, being thrifty. The thing is, Buffet is so old and so rich, but what does it matter? Will he take his money with him? Why work so hard and save so much and then live in a simple home till death? You only go around once and you should splurge proportionally and on value-based items/services. I laugh at people who save and save and save and one day their kids take it away for college or some other stupid expense (i want a porsche dad!), or they die and they leave it to some stupid charity. I see no value in working so hard and yet living poor…but SPEND-not-save-thrift? yes.

  • scir91_from_YouTube

    buying a $6000 shower curtain by TYCO exec dennis koslowski was one of the funniest and embarassing purchases by a CEO. the new york media ripped all over him in the daily news during his trial. interestingly enough, he had made a list of 60 places he possibly would have retired to and one of those places was not prison…now he will probably die there.

  • scir91_from_YouTube

    another reason why people may spend money above and beyond is for personal reasons. many people substitute purchases or “retail therapy” for solving their personal problems, and not always business decisions, yet use business decisions to justify those purchases. this is often overlooked. we are animals first, businessmen and businesswomen second.

  • http://twitter.com/WCbusinessCoach WCbusinessCoach

    Great point. Profit can only be salvaged if you watch the spending.

  • akonadministrator

    I read this story a little time ago, and now again, I lust like your blog. You inspire me in every case, and I hope I'll get into succes (if I'm not already in) with my Akon Online Blog at the end of the year. Just keep up the good work and I'll have further looks in the future.
    Cheers!

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    Great blog, this could be the best blog I ever visited this month. Never stop to write something useful dude!

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    Great blog, this could be the best blog I ever visited this month. Never stop to write something useful dude!

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