When to Buy Technology (for Startups)

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Scenario: "Dude, we gotta spend a chunk of cash on our IT systems. We need the latest-and-greatest. Our startup will make billions. Yay!" Or, you could just forget about buying the latest-and-greatest tech products for now, strengthen your cash flow -- and then buy state-of-the-art technology stuff when you viciously need it + can afford it. Why do that sucka?

  • Maintaining a strong cash flow keeps you in business to rock the world for another day, another month, another year, another decade, another century.
  • Going on a buying binge for the latest-and-greatest tech shizzle -- on the other hand -- kills your cash flow; if you don't have any money coming in, you won't be in business for long.

Technology = Overrated

64-bit PCs. ERPs. CRMs. PLMs. Yadda. Yadda. Yadda. Most businesses invest a chunk of their resources in technology. For startups with no cash flow, doing that sucks their companies dry. It's how most tech-oriented entrepreneurs fall into the entrepreneurial-technological trap:

  1. Jimmy: "Yo! We need a comprehensive $100,000 web application to manage our entire company."
  2. Steph: "Yes! Let's get a fat loan for the down payment. We need it done in 6 months."
  3. IT tech dude begins project.
  4. Six months later: IT guy says, "It's 30% completed."
  5. One year later: "50% done."
  6. 1.2 years later: "You really need a new technology platform. We'll rebuild."
  7. With no cash flow, Jimmy, Steph, and their mamas go hungry.
  8. Business dies a slow, painful death.

Ouch.

Forget the Joneses

Most entrepreneurs like Jimmy and Step think in the "oh-my-$!%$#@-gosh, we-need-Web-2.0 to-keep-up-with-the-Joneses" way:

  1. Buy sweet technology first.
  2. Sell services/products second.

And who can blame them? Most tech companies hype their products/services like it's some magic pill that will make you billions. "You need the latest-and-greatest, state-of-the-art system -- or you'll be left behind," they tell you. "No, my badass doesn't," you tell yourself. "I can do fine without it, thank-you-very-much." And, you'd be right.

F$@! Technology (For Now)

Remember the most crucial component of a startup = cash flow. If you have no operating capital:

  • You can't pay your employees.
  • You can't fund your marketing initiatives.
  • You can't pay your office bills.
  • You can't pay your rock star lifestyle.
  • You can't feed yourself and your fabulous mama.

Investing what-little-cash-you-have on technology diverts your attention and resources from what matters: strengthening your cash flow to keep your business alive for the next month. "So what do I do? What do I do?"

Start Selling Anything, Now

Sure, you probably went into business with an idea in mind (e.g. "coffee shops for book readers", etc.) But, chances are:

  • that idea could fail and cost you tons of resources;
  • building it will take longer than expected;
  • financing it will cost more than you think;
  • you'll have no money to support yourself for the foreseeable future.

Dream big, yes; but also, be realistic. If your operating capital runs out, that amazingly-awesome-ridiculously-spectacular idea of yours won't happen. HP sold bowling foul-line indicators to keep themselves in business. Sony sold heating pads. Boeing sold furniture. If you can keep your business afloat with good cash flow, you'll boost your chances of making your dream idea come to fruition. Fending off technology purchases + Selling anything you can now = Healthy cash flow that gears your startup to rock the world.

"But dudes, what if I really need technology?"

Yeah, you might need a computer, and maybe a Blackberry, and maybe a ______________. But, if you can absolutely live without something, do it. Ruble of thumb: Spend just enough, but not any more. If you need an accounting application, use Excel. If you need a contact management application, use Excel. If you need a CRM system, use Excel. If you need a payroll application, use Excel. Your business startup is probably small enough that you won't need any mutha-$@!^&#-expensive-software. Just emphatically say "NO!" to over-hyped tech peeps. Your cash flow will thank you.

Be a badass: Sell now. Tech later.


Shoutouts to fabulous Trizoko readers Michael Tavani and Anuj Dutta. Keep on rockin'! If you'd like a shout-out, give us a holla.

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Posted on November 28


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