Michael Bastos

Avoid trying to reach escape velocity at any cost

Avoid trying to reach escape velocity at any cost

In the tech industry, revenue is a bright and shiny star that outshines all other celestial objects in the vast expanse of the entrepreneurial galaxy. It represents a boundless and limitless potential for growth and expansion. A panacea that cures all ills and unlocks the next round of funding. Don’t get me wrong, revenue is essential - without paying customers, there’s nothing to build on. But once a foundation has been established, costs are just as important to the bottom line as revenue - especially if you are interested in profits, and you should be. Profits equal independence, sustainability, and, ultimately, prosperity.

However, costs should not only be viewed as a financial metric. They also serve as a measure of efficiency. Personally, I have an intense aversion to waste. Expenditures that are frivolous or not well-considered represent a misallocation of funds that could have been utilized elsewhere. It’s like an rocket that consumes too much fuel just to get out of orbit - it’s not sustainable. On the other hand, adhering to strict but reasonable tolerances is an absolute pleasure.

In my experience, entrepreneurs have a contentious relationship with cost control because they’ve seen the dangers of leaving it entirely to the finance department. Unfortunately, many companies do precisely that. If cost-cutting is delegated entirely to spreadsheet enthusiasts, the outcome can be dire. Cost control needs to be a team effort.

However, this does not imply that employees should be negotiated with for necessary purchases. That would be absurd.

It does mean that every substantial line item should be regularly evaluated to determine whether it’s worth the expense. It’s easy to let costs accumulate, and suddenly you’re looking at a staggering monthly expense, wondering how it came to be. This is especially critical if you’re a startup that has yet to establish a stable footing in profitability.

I’m an ardent proponent of cutting costs wherever possible, except for people and their well-being. Instead of spending money on vendors, invest in your employees. A lean and agile organization that can move through space indefinitely is worth budgeting for.

Avoid trying to reach escape velocity at any cost
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Avoid trying to reach escape velocity at any cost

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