Do you want to maximize profits for your startup? Reducing your startup cost allows you to increase profits for your business. This article provides practical tips on how to keep costs low for a healthy startup growth prospect.
State-of-the-art equipment, an office lease at an upscale location, and a jet-setting lifestyle, this is what dreams are made of, especially for budding entrepreneurs.
But for new startups, reality can veer away from these expectations. It takes a great dose of dedication, luck, and hard work to successfully grow a startup.
At the early stages, reducing startup cost is no longer an option, it’s an important decision that determines the life or death of a startup. You can’t afford to spend aimlessly and expect your startup dream to go as planned.
So, keep startup costs down whenever possible without compromising on product quality, operational efficiency, or customer satisfaction. Here are some practical tips you can use to manage a startup on a budget.
7 Smart Ways to Cut Down Startup Cost
1. Keep track of expenses
Track all expenses from Day 1 of launching your startup. From supplies, equipment, marketing, furnishings, employee benefits to legal, and tax consultations, every single expense should be noted.
Audit your expenses and see if there’s anything on the list that you can operate without. Make sure to keep every receipt. This helps you to organize and calculate deductions during tax season.
To save time and effort, subscribe to an online inventory management tool that integrates with your accounting software. This allows you to manage orders, shipment, payroll, and other business-related expenses in one software.
2. Consider automating and outsourcing some business processes
Are there any tasks that require minimal skills but are time-consuming? Then consider outsourcing these tasks to a third-party outsourcing provider. Software development, graphic design, content writing, and data mining are some areas you can outsource.
Hiring a software developer can be expensive, especially if you’re hiring from the US. Instead of hiring an in-house developer, why not outsource from an offshore software development company that recruits and deploys dependable staff?
Here at Full Scale, we make it easy and affordable for startup clients to outsource their software projects to our team of highly-skilled software experts.
Automation is another aspect to look into when you want to save on startup expenses. Instead of manually entering data of potential marketing leads, invest in an automated lead generation tool.
Automating time-consuming tasks allow you to optimize startup cost and eliminate the need to hire positions that you can automate.
3. Assess office space
Office space is one of the biggest startup business costs. Before signing a long-term lease contract, consider other alternatives.
Your team can work remotely while you are still sorting out your cash flow. Today, collaborating with remote teams has never been easier. There are tons of communication tools remote workers can use to coordinate with each other.
If the time comes that you outgrow the home office, then consider sharing an office space with other small startups. This helps cut down on rental expenses and expand your network with other businesses.
4. Check your suppliers
As a rule of thumb, make sure to get three quotes when purchasing supplies. This helps you assess your options without wasting time dealing with too many suppliers.
To find the best supplier, provide complete Request for Proposal (RFP) details regarding your requirements and expectations. This allows your potential suppliers to negotiate on better prices.
Like our tip no.1, constantly review your monthly invoices for products and services. Some suppliers tend to hike up their prices without notice. So, you unknowingly end up paying more.
Check if your existing broadband post plans still provide value for money. You might still be subscribed to outdated plans that are more expensive than the updated current plans.
Set a time to review all your suppliers at least once a month. Check with your existing supplier if they can offer better rates for you. If not, find another supplier that offers high-quality products or services for a better price.
5. Buy supplies in bulk
Buying office items may seem cheaper in small quantities but adding the costs together can eat up your overall budget. Instead, buy supplies in bulk since most vendors offer wholesale prices and discounts for bulk orders.
Research on special deals and compare prices that offer the best bang for the buck. Aside from the price, review the quality. This prevents you from wasting resources or space on defective products.
6. Invest in a solid recruitment plan
It comes as no surprise that payroll takes a huge chunk of your startup budget. Hiring top-notch people is costly since you’re paying for their expertise and years of experience for the job.
Thankfully, there’s another cost-effective approach to smart hiring. Hire remote workers. Collaborate and manage tasks with your remote team without worrying about equipment, Internet connection, and office space costs.
When hiring for certain positions, be specific and detailed about the job description — requirements, level of experience, and knowledge to fulfill the job.
Make sure that a potential candidate checks all the boxes and is well-suited to your startup culture. You want to avoid the unpleasant experience of rehiring people.
7. Manage cash flow
Sometimes, it’s not the lack of money that’s a problem. It could be the challenge of recouping payments from clients who promise to pay for your products or services.
There’s no way to avoid clients who take too long to pay their dues. If you can’t manage your cash flow well, it can induce a domino effect on your ability to pay for other business expenses as well.
To avoid this from happening, put your invoicing policy in writing. Be straightforward and clearly present your payment terms. State if there are any penalties for delayed payments. Doing so enables you to get paid on time and manage cash flow seamlessly.
Additionally, consider offering discounts when clients clear their payments earlier. Use an automated system that sends reminders to clients when their payments are due.
Trim Down Startup Cost to Grow your Startup
Launching a new startup can be an exciting venture. However, don’t get too caught with the excitement that you overlook how much you’re spending. Keep in mind that cash flow is the lifeblood of any business and depleting them prematurely can spell disaster for your startup.
While some startup costs are hard to avoid, you can do your best by trimming them down. Track your expenses and create a plan to prevent costs from spiraling out of control. By following the tips we shared, it will propel your startup forward and help achieve its goals.
To optimize your startup growth strategy, maybe we can help. At Full Scale, we provide cost-effective business solutions for startups keen on building their remote development team. Schedule a free consultation with us to get started.