By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
AmextaFinanceAmextaFinance
  • Home
  • News
  • Banking
  • Credit Cards
  • Loans
  • Mortgage
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Crypto
    • Forex
  • Videos
  • More
    • Finance
    • Dept Management
    • Small Business
Notification Show More
Aa
AmextaFinanceAmextaFinance
Aa
  • Banking
  • Credit Cards
  • Loans
  • Dept Management
  • Mortgage
  • Markets
  • Investing
  • Small Business
  • Videos
  • Home
  • News
  • Banking
  • Credit Cards
  • Loans
  • Mortgage
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Crypto
    • Forex
  • Videos
  • More
    • Finance
    • Dept Management
    • Small Business
Follow US
AmextaFinance > Small Business > Frugal Isn’t A Bad Word
Small Business

Frugal Isn’t A Bad Word

News Room
Last updated: 2023/11/07 at 10:35 PM
By News Room
Share
7 Min Read
SHARE

Sharat Potharaju is the cofounder and CEO of Beaconstac, whose vision is to enable digital connection with every physical object and place.

Contents
Frugality supports a forward-thinking approach.Establish transparency and accountability with yourself and your counterparts.Accept that not everything will come easily.

The word “frugal” often gets a bad rap, and frugal people are often maligned and considered miserly or parsimonious. But in certain scenarios, we shouldn’t define frugal as “cheap” but rather as an approach to investing and cutting costs. I believe a frugal attitude is required for CEOs running their companies sustainably and cost-effectively—both necessities in today’s world. It’s not about doing more with less but doing better with less.

Founders often zero in their focus on short-term profits, leading them to make decisions jeopardizing their company’s long-term health. When faced with inevitable obstacles, like a turbulent economy, quickly evolving customer needs, security concerns or a siloed organizational structure, companies can struggle to keep their heads above water.

While CEOs should lead the charge in building that cash runway, they face a conundrum of competing priorities: business models designed with a “bigger is better,” not a “deliver more with less” approach and cost-conscious clients expecting affordable solutions.

We can address this dilemma by adapting our mindset to embrace frugality and adopting these three strategies for building a long (cash) runway.

Frugality supports a forward-thinking approach.

A frugal CEO embraces a forward-thinking approach and proceeds methodically and cautiously when determining when—and how much—to spend. For example, low interest rates now can tempt even the most cautious spenders to open their wallets wide—a short-sighted move, indeed. After all, interest rates don’t stay low forever. The Fed has raised interest rates 10 times between March 2022 and July 2023, totaling five percentage points. Imagine the size of payments now, with much higher interest rates. Instead, I recommend startups build products that generate business and cash flow now while working on those million-dollar ideas in the background.

Frugality isn’t a mindset for only the leaders to adopt, either. It’s imperative that they drive this attitude deeply into their company’s culture. Everyone, from the top down, should appreciate the value of taking a frugal approach. And part of that appreciation comes from recognizing that being frugal doesn’t mean never spending money—it means spending money on the right things.

A 2023 study based on a sample of 1,046 CEOs concluded that frugal CEOs are more likely to lead their companies to higher profits because they spend carefully and invest intentionally in the right areas. These CEOs are also more likely to survive a financial crisis because they prioritize building a cushion to help weather difficult times.

Shareholders benefit from a more economical approach to spending, too. Prudent CEOs are more likely to invest in long-term growth opportunities and realize more significant gains in their shareholder value.

Establish transparency and accountability with yourself and your counterparts.

I have a record of every dime my company has spent in the last 10 years. This level of transparency is crucial because it allows my partner and the rest of our leadership team to make informed decisions about the business’s future. You must instrument the spending because you can’t—and won’t—prioritize what you don’t measure.

Another misconception: A cash focus isn’t just about keeping expenses low but also maintaining a strong revenue focus. Most companies traditionally rely on monthly, quarterly and annual reports to see their cash flows, but do those reports help predict what may happen in the future? No.

Cash flow forecasting, however, helps to establish a cash-focused culture and create a more solid cash position for companies. Companies can use this strategy to gain a much more accurate picture of past and current cash situations and help predict future needs, informing planning and business decisions. And it allows everyone to identify opportunities to save or reallocate budgets based on need.

But you cannot—and should not—keep this information to just the finance team and CEO. I recommend sharing it with the entire leadership team so everyone is on the same page.

Accept that not everything will come easily.

We’re familiar with the expression that to win a war sometimes requires losing a battle, right? This idiom holds true with companies, too. Sometimes, a new company must forgo products that aren’t resonating with its customers. In our early years as entrepreneurs, in order to create the successful business we have today, my co-founder and I had to back-burner projects we were incredibly passionate about.

And that’s okay. Some products we revisited once our company was more stable. Others remain in the deep freeze; perhaps we’ll revisit them one day. To scale responsibly and successfully requires focusing on pairing growth with staying cash flow-positive rather than adopting a growth-at-all-costs blueprint.

Depending on your business model, products and services, you can use different game plans to ensure your company remains cash-flow positive, like:

• Offering discounted annual plans to collect cash upfront.

• Opting for a net 30-day collection policy.

• Focusing on ideal customer profiles that don’t bleed you dry.

• Managing inventory and business operations effectively.

• Maintaining that buffer or long cash runway.

• Taking advantage of higher interest rates (like now) by leveraging high-yield business savings accounts.

In addition to enabling CEOs to build a long cash runway, championing a frugal attitude aligns with growth strategies designed to increase business value, create meaningful products and deliver what consumers value the most: affordability, quality, simplicity and sustainability.

Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?

Read the full article here

News Room November 7, 2023 November 7, 2023
Share this Article
Facebook Twitter Copy Link Print
Leave a comment Leave a comment

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Finance Weekly Newsletter

Join now for the latest news, tips, and analysis about personal finance, credit cards, dept management, and many more from our experts.
Join Now
Transatlantic antitrust ties fray as US and EU regulators squabble

US and European antitrust enforcers used to work so closely that Jonathan…

Uber wins multimillion-pound reprieve on disputed UK tax payments

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects…

An American pope for the global south

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects…

China and US kick off high-stakes trade talks in Geneva

Unlock the White House Watch newsletter for freeYour guide to what Trump’s…

How this CEO tackled his own financial woes

Watch full video on YouTube

- Advertisement -
Ad imageAd image

You Might Also Like

Small Business

Why Do We Stay In A Job When We Are Not Happy? Insights To Help You Get The Career You Deserve

By News Room
Small Business

Making A Large Language Model Transparent, Compliant And Reliable

By News Room
Small Business

The Important Initiative For Real Digital Marketing Results

By News Room
Small Business

The Future Of Real Estate

By News Room
Small Business

How AI Is Transforming Healthcare Risk Adjustment

By News Room
Small Business

How Do Hard Knocks Help? 5 Life-Changing Lessons Taught By Adversity

By News Room
Small Business

Lessons Learned From The World’s Most Successful Startups

By News Room
Small Business

Small Business Saturday Encourages Consumers To Shop Small And Local

By News Room
Facebook Twitter Pinterest Youtube Instagram
Company
  • Privacy Policy
  • Terms & Conditions
  • Press Release
  • Contact
  • Advertisement
More Info
  • Newsletter
  • Market Data
  • Credit Cards
  • Videos

Sign Up For Free

Subscribe to our newsletter and don't miss out on our programs, webinars and trainings.

I have read and agree to the terms & conditions
Join Community

2023 © Indepta.com. All Rights Reserved.

YOUR EMAIL HAS BEEN CONFIRMED.
THANK YOU!

Welcome Back!

Sign in to your account

Lost your password?