I guess this is likely the most obvious thing I can say about bootstrapping or running a lean startup: it seems that the obvious thing to do is to cut away all of the unnecessary expenses and only spend money on things that are needed in furthering the business.
Yet I don't think the principle is that clear. It makes sense in theory, but on the ground there's a whole different context to consider. I'll explain with the story of what is now the WooThemes office.
WooHQ: Then & Now
As you know by know, I conceptualized & released the product that lead to the creation of WooThemes, on my own and from my bedroom.
In the months thereafter, whilst my co-founders & I were building WooThemes V1, I decided that I had, had enough of working from home and I wanted to get a little office. The initial idea was to create some kind of co-working space (in hindsight, I was being too progressive & idealistic, as these are still not as popular in SA as they are abroad), but soon turned into Radiiate's (R.I.P) offices (which housed myself, FRESH01co & Foxinni). (This eventually became the WooThemes office when FRESH01 & Foxinni moved to Woo a couple of months later.)
We had humble beginnings: loads of empty space, a whole office we didn't use and nothing fancy otherwise. This was just the place - away from home - that we could use to get some work done.
But we also had a little bit more… We had a few awesome posters on the walls (cheap decor), we had a good coffee machine and had a Wii for some fun.
If I argued that we should've avoided all of the seemingly unnecessary expenses, I could've probably argued that: 1) we didn't actually need an office (we could work remotely / from home if we wanted); or 2) that we definitely didn't need decor, a coffee machine (can you say instant coffee?) and a Wii (wtf?).
Balance, Pride & Progression
For me the balance of my decisions (ito the office) is clear today. Back then I got the extra stuff, because I was sucked in with the romanticism attached to being a successful startup. I wanted to start at the same place that a 1- or 2-year-old startup was at. Luckily for me, I had a bit of spare cash around (the combo of Woo's growth at the time and still doing loads of consulting work on Radiiate), so I could afford (ito the cash) to invest those things in the office and managed to not sink the business due to semi-reckless spending.
Today I realize that there was pride involved: I wanted to go to an office that I could be proud about and a place where I could actually get some work done. If the office was a complete shithole, it would've been better to just stay home and work remotely. An office is generally the last thing an early-stage startup should spend money on, but when you reach the point where you do need office space, you need to find that balance between what's necessary and what isn't. In hindsight it feels like I would've undone the good spending (conservative lease agreement) if I didn't augment it with a few extra's.
Finding that balance doesn't change the bootstrapping ethos either. We spent 4 years in that office until we finally outgrew it; each year, we'd make small, incremental changes / additions to the office to make it better. And it was only after that 4 year lease period that when we moved office that we could afford to splash a little on something awesome.
I don't think there is a black-on-white, right & wrong formula in terms of what you should & shouldn't spend money on whilst bootstrapping. Every expense just needs to serve its purpose and accelerate you meeting your goals.