Google grew from start-up to global brand in an incredibly short space of time.
But Google weren’t the first players in the emerging web search market. They didn’t have first to market advantage, which is often so important.
What they did have over competitors such as Yahoo though was a significant cost advantage.
More widely known is that Google’s search algorithm was superior to other web search providers, and that this improved user experience lead to an explosion in use and the massive growth of the company to a global brand. But how did they achieve a cost advantage and how did it help?
As Google were starting out and growing, they needed IT hardware to support the growing traffic coming to their website. If purchased new, like their competitors were doing, the costs would have been many hundreds of thousands of dollars in each growth phase. So they made a decision to buy ‘good enough’ second-hand IT hardware at a fraction of the cost of buying new. It was this decision that allowed them to grow at a rate rapid enough to keep up with demand and take market share from competitors.
So what does this have to do with your business start up?
The point is – having a cost advantage over your competitors can have a huge effect on your ability to grow and capture market share. This is why it is critical to have a business plan that focuses you on your core purpose and offering, and forces you to think hard about how you invest your limited resources into core and non-core assets.
Here are some ideas on how to lower costs when you are starting out:
- Do you really need the very latest laptops, mobile phones and tablets? Look for second hand options that are ‘good enough’.
- Use as much free software as possible. There are tons of open source software on the market today, which can save you a ton of cash on licencing.
- Do you really need a full time office, or can you avoid the cost of a fixed lease and instead have staff work from home and use a ‘virtual office’ facility when face to face meetings are necessary?
- Hire the least number of people possible. Don’t get caught in the artificial contest of ‘who has the most staff’ to try and impress others. Instead, the contest should be ‘who can get away with the lowest number of staff’ and still be successful. There are many effective outsourcing options available today – use them.
- Keep office stationary simple – there is no need to spend a lot on fancy letterhead.