Google style perks at your scrappy startup?

Lifehacker linked to an article on the top workplaces in Australia:

“A recent poll in Australian business magazine BRW set out to find the 50 best workplaces, and while the results are Australia-specific, one thing stood out: Companies with great perks consistently topped the list.”

When you’re a part of the tech startup community it’s commonplace to be competitive about who’s scrappier.

“We got faux Aeron chairs at Costco for $99.”

“Oh yeah? We stand all day. Chairs are for people who like to waste money.”

It goes on like that.

To me this is another symptom that’s endemic to the bet the farm mentality that pervades many (though not all) startups these days. We’ll work our asses off for crap wages in a company with crap perks and benefits but will all own boats once we hit it big and sell the company or go IPO (does anyone go IPO anymore?).

To me though, the challenge of a tech startup is not to pick the single best idea and scrimp until it makes everyone rich. Countless startups try all kinds of ideas that fail all the time (us included). And even if you don’t fail outright, wild riches are far from a sure thing. More likely is if you can get the coveted buyout it results in the founders getting enough money to pay off their mortgages, and the rank and file making back some of the salary they gave up to work at the startup in the first place. The Google style riches are an outlier and nobody in their right mind should depend on that type of outcome.

Creating a sustainable startup that can fail indefinitely until it succeeds is the only logical response to the reality of trying to start a successful business. (Some people take a similar approach and call it being a serial entrepreneur, I prefer not having to print new business cards every time something doesn’t pan out.) But if we can’t depend on a Google size outcome, maybe we can frontload some of the good work life. After all, we’re not in a sprint to IPO, we’re running a marathon until we craft a sustainable exponentially profitable business. So why not make that long run comfortable by having more perks and scrimping a little less? I’m not talking about wasting money on extravagances, I’m talking about making work a place you want to be. Making it feel like home.

The main response you’ll hear from people about perks at startups is often that they’re too expensive. It’s true that perks cost money. But I believe that the real killer is not the cost of the perks, it’s the multiplier. It’s the number of employees that really make the perks stand out. For example:

  • Assuming lunch costs $15 per person per day and you have to buy it for three people 40 weeks (we take roughly 12 weeks of vacation a year) then it costs you $9,000.
  • With a complement of 20 people your cost is now $60,000.

Frankly, given the kind of margins we look for in software, neither of these is really that much money. It’s when you get to 100 people that it starts to feel like real money — $300,000. (And if you have 100 people at a software company you’d better be making some good scratch so even 300k isn’t a huge deal). That said, even something somewhat pricey like lunch just isn’t a ton of money when you have very few people.

One other thought, instead of having 28 employees, what about 27. Saving that one developer could pay for lunch for the year for the remaining 27 (assuming 3k per year per employee for lunches and $85k per employee fully burdened cost – and that’s low in my opinion). And besides, Tibor was never a very good developer anyway.

And even if you just do free drinks and snacks, with fewer people you can personalize it to the point where it feels very special. Every employee just picks what they want. No need for everyone to agree on some lowest common denominator set of drinks. Just get what everyone requests. Even the “expensive drinks”. It’s worth it.

But there are other things that you can offer that don’t add nearly as much to your expenses. The first place to look is in the category of non-recurring expenses. They happen once and they’re done. I realize monitors don’t last forever, but they last longer than the typical startup employee’s tenure. And the psycho big ones just don’t cost that much. These have the added bonus of improving worker productivity as well. Videogames, music systems, wide screen TVs, etc. are all great non-recurring expenses.

Gadgets aren’t really non-recurring expenses since new ones are coming out all the time. ;) But imagine giving each employee a thousand dollar a year budget for gadgets. In a tech company this is worth way more to the geek employees than the mere $1000. It’s not $1000, it’s free toys! Ultimately one of them will port your app to some new mobile platform over a weekend just to prove to everyone in the office how cool the new gadget is and you’ll get your money back. For 10 employees it’s only $10,000.

There are recurring ones that are pretty good as well cause they’re low cost and high impact. How about free postage? Given how little people use snail mail these days, not only is this low cost, but it’s extra annoying to have to get stamps because you send out one letter a month. At the rate the post office is raising the postage rate you can’t even use the entire sheet of stamps before the price has gone up.

Google brings in a masseuse. You can too. Even if they make $50 an hour they can cover a team of ten people getting 15 minute massages in under 3 hours. Over our 40 week schedule that’s $10,000 a year on massages if the person comes weekly. They could come every other week and people would still be pretty psyched. What about bringing in someone to cut hair?

At every startup, someone is doing some of the more administrative tasks that need doing. At our startup it’s typically me. Jenny and Walter are too busy producing actual software. ;) But the person who does administrative stuff can also help with some key annoyances that can be great perks. For example: a weekly run to the dry cleaner. Work doesn’t even have to pay for the dry cleaning. Just not having to go is a perk in itself.

Ultimately your ability to retain happy employees will be worth way more than these expenditures cost you out of pocket. Hiring, training, and integrating new employees to replace old ones who left is a timely and costly process. There are lots of intangible costs here that nobody ever counts including how unproductive it makes all the remaining folks who have to do interviews and training of a new person. And while those costs don’t show up as a line item, free lunch does. So it’s easy to cut, or fear.

I believe that if you keep the number of full-time employees to the absolute bare minimum then offering these types of perks, comforts, and conveniences are pocket change in terms of keeping everyone happy. If you’re in it to win it then it’s going to be a long ride unless you’re very lucky (and most businesses aren’t). If you have financed your business in a sustainable way so that you can be around until you succeed then it’s only logical to make sure everyone’s as comfy as possible for the trip. You’d be surprised how hard it is to lose happy employees to competitors.

Finally, startups need to realize that people are human beings. They’re not always rational. The 70k per year offer with lots of perks may be way more attractive than the 80k per year offer at the “scrappy” company. The perks may cost less than the 10k difference. They may even cost the same. (Imagine what you could do for each employee’s comfort and convenience at work with an extra 10k each year.) But most humans will weigh the environment and convenience of the perks above their straight cash value. Especially when they’re something they can show off to their friends.

(p.s. If you want more inspiration on creating a small business that does things in a special way, then check out our upcoming conference — Small and Special.)