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 so

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REWORK

Shownotes Transcript

It’s Time to Care About Costs