One of the US's richest self-made women explains how her company established a 'culture of frugality' that withstood the Great Recession

• Liz Elting cofounded TransPerfect in 1992 and led the company as co-CEO for 26 years.
• In that time, the company withstood two recessions by staying frugal and minimizing risk.

Liz Elting led the global translation company TransPerfect as co-CEO for 26 years. In that time, there were two major recessions in the US: the dot-com bubble burst and the Great Recession of 2008.

Despite economic instability, her company remained strong. "It didn't really affect us in a negative way," she said.

Elting cofounded TransPerfect in 1992 while earning her MBA at New York University. She's one of America's richest self-made women, according to Forbes, which estimated her net worth in June to be $370 million. In 2018, she sold her company shares for $385 million to her TransPerfect cofounder, Phil Shawe.

There's growing concern among experts that another recession is on the horizon. The Federal Reserve recently hiked interest rates for the fourth time to offset inflation, stock prices have dropped, and Americans have been spending their savings. Some analysts have speculated that the next recession could mimic the downturn in 1990 and 1991.

Elting attributed TransPerfect's resilience to what she called a "culture of frugality." As entrepreneurs plan for a recession, here are Elting's tips for staying frugal and minimizing risk.

Diversify your clients to mitigate risk

TransPerfect started as a translation service that worked with clients in a variety of industries, including the legal, pharmaceutical, telecommunications, and mining industries. That meant it never relied on the success of any one market.

Additionally, Elting said, each client represented no more than 2% of the company's business. This helped TransPerfect diversify its risk — if one client canceled a contract, it wasn't a significant financial loss.

She advised entrepreneurs to take this approach if they want to continue generating consistent revenue during economic crises.

"Make sure no one client accounts for too much of your business," she said. "In the early days, that big client will take you to the next level, but by the same token, make sure you're not relying on a small number of clients."

Don't spend money you don't have

Elting said that no matter TransPerfect's stage of growth — from a startup with just a few employees to a global organization with international offices — every major expense was meticulously planned.

For example, she waited two years to hire any employees and did so only once the company reached $500,000 in annual revenue.

"We waited longer than some companies do," she said. "When we didn't have a lot of clients, when we were small and just starting out, we made sure we didn't spend money we didn't have."

The company established financial goals as markers of its growth. For example, one employee started at a new location with a monthly sales goal they had to meet before they could hire another employee. Then those two employees had to meet a monthly sales goal to hire another employee, and so on.

Elting advised entrepreneurs to take this frugal approach as they expand. "Don't spend money you don't have — or if you're spending it, be very careful about what you spend it on," she said.

Reinvest profits into sales and marketing

Lastly, Elting suggested that entrepreneurs who are eager to scale reinvest their profits first into sales and marketing since those are the departments that will bring in new clients and ultimately generate revenue.

She added that while other expenses like research and development are important, they should be secondary.

"It's easy to overspend," she said. "That's the No. 1 reason companies go out of business. They run out of cash."