Tech startups are becoming more popular, thanks in part to their agility, the fast pace of technological development, and high demand from both consumers and investors. However, even though some tech startups can build momentum with only a minimal investment, for entrepreneurs to break a profit and survive that all-too-important first year of operations, they’ll need to minimize costs as much as possible while establishing a consistent line of income.
Fortunately, there are some relatively painless ways you can reduce your expenses in a new startup.
How to Cut Costs
Obviously, you’ll want to avoid cutting any costs that affect the quality or effectiveness of your core product; if you save a few bucks, but compromise your revenue stream, you’ll end up in a neutral position, rather than a better one.
Instead, these strategies are intended to help you cut your expenses without significantly affecting day-to-day operations:
1. Work remotely
If your business model will allow it, consider working fully remotely. With today’s technology, it’s more possible than ever for an entire team of people to telecommute and still be on the same page with one another. There are some downsides to having your entire team work from home, but you’ll save thousands of dollars every month on office costs, including rent and utilities.
2. Sublet your office space
If you do buy an office space, consider subletting it to another tenant who can cohabitate the space with you. It will draw in some rental income you can use to offset the costs of rental or ownership, and provide you all the advantages of having your own space. If you own the property, you’ll have much more flexibility, but since you’re likely renting, be sure to check with your landlord to secure permission to sublet your space.
3. Consolidate your software tools
You’ll be using lots of software tools to manage your company, improve productivity, and keep things organized, but with most of them demanding an ongoing subscription cost, those expenses can get out of hand fast. Instead of investing in dozens of separate tools, opt for all-in-one solutions to minimize your total expenses and keep things as simple to manage as possible.
4. Offer non-monetary perks
Recruiting talented employees is going to be one of your biggest and most important expenses; you need dedicated, valuable team members to build your product and support your company, but they’ll need ample compensation if they work for you. Instead of offering purely monetary benefits, like higher salaries and better retirement plans, opt for non-monetary perks like more flexible schedules and greater autonomy to attract that talent.
5. Market smarter
Your marketing and advertising costs will be significant, but you still need to market yourself if you want your business to grow. Accordingly, you’ll need to choose lower-cost, more efficient marketing and advertising strategies. Experiment with lots of different approaches, and only keep the tactics that provide a measurable return on investment.
6. Cut travel
Try to keep your travel costs to a bare minimum. Travel costs, including mileage reimbursement, plane tickets, hotel accommodations, and food, can easily range in the thousands of dollars per month if you have multiple salespeople traveling frequently. By sticking to phone calls and remote meetings as much as possible, you can keep these costs to a minimum.
7. Negotiate everything
You’ll be amazed how many prices are negotiable, from the costs of your office supplies to the prices set by vendors and prospective partners. If you walk into every deal with an intention to negotiate, you can reduce your average costs considerably.
Prioritizing Revenue
Remember, to be successful, you have to keep your costs to a minimum while still maximizing your revenue stream. For that, you’ll need to focus your attention on creating a minimum viable product. Essentially, that means investing all your time and money into getting a bare-bones product to market as quickly as possible; it means sacrificing some of the perks and features you want in order to get a revenue stream rolling.
If you can build up a revenue stream while keeping your costs low, your enterprise will be profitable in no time.
