Are you at the point where you are looking for cost cutting tips for startups?
Some phases of the economy demand businesses focus on cutting costs. If you are facing one of these periods in your market, check out these cost cutting tips for startups…
No matter how big or small your company is there are times when you need to take a hard look at cost cutting measures. In fact, all smart CEOs and entrepreneurs should be making a regular evaluation of their spending and revenues. Even when you have a full-time CFO, and great bookkeeper and accounting firm on retainer, and it isn’t your favorite thing to do.
Here’s how to look at your numbers, save wasted dollars, optimize for sustaining your businesses and profitability, even in tougher times.
What is the single one most important thing your startup business is all about?
Before diving into your finances and trying to figure out cost cutting tips for startups, it is imperative that you are focused. The number one startup mistake that even big companies make is cutting the wrong costs, and ultimately doing far more damage to their business and shareholders.
Revisit your mission, vision, and a big goal. Use this as the lens for evaluating every expense and hour spent. Each dollar and minute is either taking you closer or further from the number one thing and the critical milestones on the way there, and achieving them in the right and most efficient order.
Audit Your Finances
What are your real expenses? How much are they? What is your real profit? Where is that really coming from? You need to shift more focus and budget there.
You’ll probably quickly identify items that are not necessary expenses. You can also benefit from an outside consultation and unbiased review which may open your eyes to items you thought were necessary expenses, but which are actually killing your finances.
Also keeping your finances up to date will be critical also if you are looking to raise capital from investors as they will demand your financial model with all type of historicals as well as projections.
Keep in mind that in fundraising storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
Identify The Musts
When thinking about cost cutting tips for startups, you need to ask yourself what are the most basic absolute musts your business needs to spend money on? There is probably truly very little that needs to be on this list. Be tough, you can always expand later once you are in a better financial position and have the luxury of discretionary spending.
If it is not on the must list, then you must not spend on it. You can’t afford to.
Get rid of those expenses. Be a good decision-maker. Every day and hour can count. Be decisive. Cut the cost. You can always spend more later if you have the money to spend.
Identify Waste & Areas For Optimization
There may be areas in which your organization is flat out wasting money and resources. Stop those issues immediately. This is one of the best cost cutting tips for startupsç
If you are in a business where waste is just a part of the DNA of your industry, and it absolutely cannot be avoided, then consider benchmarking, measuring, and ways to minimize that waste. Or innovate to change that dynamic. You may even discover a whole new game-changing business opportunity.
Then there are the parts of your business where you can save a lot by optimizing. Lead generation and lead handling is one of the biggest areas for this. Companies frequently waste 25% to 50% of their marketing budgets on the wrong channels, subpar conversion rates and poor responsiveness.
Filter and target more, spend less time on bad leads, close more sales, and increase ROI on your marketing budget and sales process. This can have the simultaneous benefit of bringing in more cash and improving profit margins so that you don’t have to cut costs as dramatically.
You may find interesting the video below where I go in detail into the cost cutting tips for startups.
Can you renegotiate leases, financing terms, contracts, and vendor services? Don’t be unfair, but look for win-win solutions. This may include buyouts, discounts, and tax breaks for paying in advance or extending contract commitments.
It usually doesn’t hurt to ask. The worst that can happen is that they say no. Yet, you might easily save 10% of your expenses across the board just by asking. Those savings can add up pretty quickly.
Restructure Your Team
When wondering about cost cutting tips for startups it is important to mention that many big established companies and new tech startups alike have made countless poor and inefficient hiring decisions over the past decade.
They spent big on frivolous perks. They hired in the most expensive cities where rents can be more than the salaries expected just a few hours away. They brought in in-house employees instead of outsourcing. They often hired too many people unnecessarily, overlapping skill sets, or gave them equipment and buried themselves in overhead which isn’t scalable. Remember, being scalable is equally about being able to effortlessly scale down in tighter times as up in good times.
Experienced CEOs and founders have found that making large layoffs at one time to right-size the company is far more effective, and a lot better for morale and operations than a series of smaller layoffs. Do the hard thing. Get it over with and move on.
In many cases, you may need to shed a lot more mediocre talent and bring in new more experienced talent with domain expertise. They can get you a far better ROI on your labor costs, with a much lower management burden.
Say No More To Meetings
Meetings haven’t been cool since the 1960s. They haven’t been needed since the very early 2000s. If it isn’t a must, then you can’t afford it.
Whether in person, over the phone, or via some new frivolous video chat platform, just say no to meetings.
Trade Instead Of Purchase
What can you trade for instead of spending money on it? If you have commercial real estate space, you don’t need that anymore. Can you offer it to someone else who will in turn give you discounts or send more business your way?
Can you trade your product for essential services you do need? Can you exchange marketing lists and messages instead of buying or leasing lists and building a prospect database from scratch?
Hopefully this post provided you with some guidance as you are looking into cost cutting tips for startups.