It’s Time to Care About Costs

In a time when many companies are disregarding profitability and spending recklessly, Jason Fried and David Heinemeier Hansson have taken a different approach at 37signals. They believe that caring about costs is a timely concern and a fundamental principle for running a successful small business.

In this episode of the “Rework” podcast, they sit down with Kimberly Rhodes to discuss the critical importance of cost management in today's business landscape.

From reevaluating software subscriptions to establishing fixed pricing models, listen in as Jason and David share their proactive approach to cost management. They discuss strategies for navigating the dangers of unchecked expenses and eliminating unnecessary expenditures and their detrimental effects on a company’s long-term viability. 

Tune in as Jason and David share their practical insights and hard-won wisdom for building a sustainable AND profitable business in any economic climate. 

Show Notes: 

 

[00:00] - Kimberly introduces the episode and opens today's discussion on the importance of caring about costs in business.

[00:49] - As the availability of money is decreasing, companies are starting to realize the importance of profitability.

[02:22] - Jason discusses the difficulty of shifting into a cost-conscious mindset and the common first steps of cutting costs.

[03:39] - How to ensure profitability. 

[04:41] - David shares their experience during the dot-com boom and bust, which influenced their mindset of never wanting to be financially vulnerable. 

[06:24] - Why smaller bootstrap businesses must cultivate cost-conscious habits early on.

[07:16] - Money buys independence (options, time, and flexibility). 

[08:07] - Redefining what makes financial sense and prioritizing cost-effectiveness—even if it's not your money.

[08:50] - Companies are facing the harsh reality of survival. It’s time to focus on maintainable practices before it all comes crashing down. 

[09:40] - An opportunity to rein in wasteful spending for a more sustainable future.

[10:37] - Without occasional controlled burns, the forest of technology becomes a ticking time bomb. 

[11:21] - A startup in Denmark is facing the end of their runway in just nine months—how they could extend their runway twofold.

[12:19] - Kimberly shares about the caution-to-carelessness cycle that happens as small businesses begin to thrive. 

[12:43] - Jason shares how hard it is to break free from the spend-centric growth-chasing culture, especially when fueled by other people’s money. 

[14:13] - The "spend it all" mentality that creates a Monopoly-style illusion masking financial responsibility.

[14:48] - The habit of spending is easily acquired, but making more than you spend is the real challenge, and in the next 18 months, companies lacking a profitable formula will face the music.

[15:44] -Categorizing and Value Assessment: monitoring expenses depends on the stage of your business. 

[16:30] - David shares that if you evaluate costs beyond the immediate month or year, numbers that seem small become meaningful.

[18:46] - Some costs can evoke disgust when examined closely—like our $3 million annual cloud bill—revealing their true magnitude

[19:34] - A company should be a well-run, efficient system like a perfectly prepared hotdog.

[20:42] - Kimberly shares that staffing and subscriptions are crucial to evaluate. Subscriptions, in particular, can accumulate and should be assessed for their value.

[21:47] - David shares how 37signals prices their products and how overlooking unnecessary subscriptions can significantly impact your bottom line.

[22:30] - Would you pay for multiple tools when one comprehensive solution, like Basecamp, would suffice?

[23:20] - Why paying excessive amounts for separate tools seems grossly unnecessary, Kimberly shares how the expense of five different software tools to Basecamp and the savings are staggering! 

[24:07] - Jason gives an example of how variable costs can quickly spiral out of control (especially with per-seat pricing)

[24:52] - How Basecamp's unlimited plan with a maximum cap offers businesses the peace of mind of a fixed price, helping to keep expenses from spiraling out of control.

[25:39] - Predictability can be a good thing—how to assess variable costs and determine ways to fix them.

[26:59] - How SaaS software's per-seat pricing model often leads to exorbitant expenses. Plus, a story about what Twitter's shift from Campfire to Slack cost them. 

[28:19] - We're spending how much money on the chat tool? Even companies the size of Twitter can use Basecamp for just $299 a month. 

[29:11] - You can find out more about Basecamp at basecamp.com. “Rework” is a production of 37signals. You can find show notes and transcripts on our website at 37signals.com/podcast. If you have a question for David and Jason about running a business, leave a voicemail at 708-628-7850 or email us with questions to have it answered on an upcoming episode.

Links and Resources:

Leaving the Cloud | REWORK 

Leaving the Cloud Part 2 | REWORK 

Rework

Do you have a question for Jason and David? Leave us a voicemail at 708-628-7850 or email us

HEY World | HEY 

Sign up for a 30-day free trial at Basecamp.com 

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