Posted by Kanika Sinha
May 1, 2023 | 5-minute read (861 words)
As inflation continues to impact economies around the world, small businesses and startups are facing the daunting challenge of compensating for skyrocketing costs. It seems like everything, from raw materials and wages, to operating expenses and utilities, are growing more expensive by the month. And startups are increasingly feeling the financial burden.
Leveraging cost-cutting measures is one way to minimize the impact of inflation — and improve your startup’s profitability — without having to raise your own prices. But the expenses you cut matter. It’s essential to limit waste without compromising the most important aspects of your business operations.
In this article, we’ll cover three practical cost-cutting tips that can help your startup navigate today’s inflationary pressures and improve your chances of long-term success. Because by making informed decisions about which expenses to trim today, you can strengthen your growing company’s bottom line tomorrow.
Cost-cutting measure #1: Seek competitive bids for major expenses such as insurance and utilities
Insurance and utilities are unavoidable expenses. But that doesn’t mean you have to settle for the first bid you get. Nearly every utility you utilize can be negotiated or transferred to a more cost-effective vendor, and there are hundreds of insurance companies vying for your startup’s business.
To reduce your costs this year, regularly review your expenditures for utilities like:
- Company phones
- Waste disposal
- Cable or satellite television
- Energy — if you live in a state that allows multiple energy options
With a few phone calls and a little research, you may be able to significantly reduce your monthly expenditures for these basic business necessities.
When it comes to insurance, shop around for multiple quotes, and inform each insurance company you speak to that you’re looking at several options. Often, they’ll offer a lower rate just to remain competitive. Compare the monthly cost, deductibles, and coverage of each option you consider until you find the one that offers the best value for your money. It may not be the cheapest option available to you, but should be the one that best balances coverage and costs.
Cost-cutting measure #2: Consolidate or eliminate redundant software and services
Chances are, your startup relies on a number of software solutions and third-party services to operate successfully. Is it possible you have redundant solutions in place? One effective cost-cutting strategy you can implement right away is to review and consolidate, or cancel the software and service solutions you no longer need.
Consider all the software tools you and your team use in daily operations. Do any of your solutions offer new features that eliminate your need to pay for additional software? Can you cancel one software by upgrading to a different tool — and accessing its extra features instead? For example, if your startup is paying for a CRM system and a separate email marketing software, consider finding an all-in-one CRM that does both for less than what you pay for the two separate tools.
When reviewing the services you pay for, look for subscriptions you no longer need, or services that have recently risen in cost. You may be able to shift those services to an in-house team member and cut the subscription, or update your workflow to remove the need for that service altogether.
Cost-cutting measure #3: Consider outsourcing or freelancing for specific tasks
The third cost-cutting measure you can use to shave your expenses and boost your bottom line is outsourcing some of the work your team does, or replacing full-time employees with freelance professionals.
It costs an average of $4,000 to $20,000 to hire just one new employee. That’s why freelance and outsourced professionals are more in-demand than ever. By using their external expertise on a single project or ongoing basis, you have access to an on-demand professional, without having to cover a full-time salary and benefits.
The best tasks to outsource include:
Financial jobs. Your accounting, bookkeeping, tax management, financial planning and analysis, and CFO services can all be outsourced to a cost-effective financial services agency.
Marketing work. Copywriting, design, website management and marketing strategy can be outsourced to an experienced agency or freelance professional who offers greater insights than your internal team may have.
IT support. Rather than bringing in expensive full-time IT professionals, outsource your ongoing technical support, both internally and for customers, to a trained and knowledgeable team.
Each of these outsourcing professionals gives your startup access to a greater level of expertise than you may be able to afford to hire in-house. By tapping into their services on-demand, you can keep your costs low while leveraging the best services available.
These cost-cutting measures are far from one-size-fits-all. Choose the ones that best fit your startup.
You may not have the ability to reduce your utilities or cancel your subscriptions. But implementing even just one or two measures can significantly decrease your startup’s overhead in this cash-strapped time. Review the list above, and make a point to look for small ways you can make big improvements. And when in doubt, work with an experienced CFO or FP&A professional to find the best cost-saving strategies for your unique venture.