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.
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.
- 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?