Ways to keep costs down

Filed in archive Entrepreneurship on January 8, 2006

Paul Allen goes through some interesting examples how to keep your costs down when building a company:

"One of my friends has a brilliant way to keep his costs down and to give his employees upside. Dan Oaks from DVO.com allows his employees to buy into his profit-sharing plan on a monthly basis. They risk some of their regular salary to buy the right to share the profits if the company meets or exceeds its goals. He has seem incredible results from the team doing everything possible to share in the bounty by making sure the revenue goals are hit each month. If the company doesn't hit its numbers, its payroll actually goes down. This idea works great if you have fairly consistent revenue and want to grow it faster, with full support from your team.

An incredibly important idea is to phase in employees as they are needed in the correct order. A recent article from Silicon Valley discussed that many software companies scale up a full-fledged sales team (with the burn rate that entails) before they have proven the best way to generate sales. Start small, see what works, and then scale up quickly when adding sales headcount adds to profits. Early on, sometimes sales headcount can be a cost center. That is a formula for disaster."

Read it all.