That initial feeling of moving into a new office is one of ultimate excitement, and then just as quickly, sudden dread. The questions of “Can we afford this?” and “Did we sign too long of a lease?” come rolling in. As a startup company, every cent you spend feels like a little bit of your soul leaves with it. Right? You’re not alone.
How do you combat that feeling though? The first way is to hunker down and figure out if you’re really making the most cost-effective choices.
What are some ways you can cut costs without sacrificing efficiency or company morale? Let’s do some brainstorming and see where a business could consider cutting costs, and places you should not scrimp. (Spoiler: it’s exactly where you know you shouldn’t.)
Downsize or Shared Office Space
If you’re one-man team, shared office space could be a lifesaver. Searching for the right shared office space? Check out local incubators to see if they offer great deals, and don’t miss out on local angel investor groups and meetups. While they might not offer you free office space, you will meet people who have similar perspectives and may have some great resources to find cost-saving office space.
If you are already a larger team, a shared office space might not be the appropriate space for you. However, that angel investor group I mentioned earlier is a great place to find those one-man teams looking for a small closet of space to put their head down and work.
Consider sub-leasing a part of your space. Before you sign a long lease with them, start out with a month-to-month option to ensure that you all work well together and that neither party is disturbed by the difference in the work environment.
And, as a related note, if you’re not attending investor meetups, try one or two. From pitch critiques to meeting potential investors, these can prove invaluable for your company.
There’s no such thing as free lunch
A survey conducted by Peapod found that the average happiness of an employee was raised 11% when employers offered free meals. Happy employees make hard-working employees!
If you’re looking to throw a great lunch party for your hard-working team, now might not be the time to order champagne and caviar.
Looking to save some cash while increasing morale? There’s a reason every elementary party in school served pizza. It goes a long way without being expensive and nearly everyone can find a flavour they like. Hold on that fancy charcuterie plate until you get purchased by a Fortune 500, or at least until you are breaking even.
Other tips for great meals that won’t break the bank but will keep morale up
- Skip the individual boxed lunches and go straight to buffet-style
- Check with your team regarding any dietary restrictions. Nothing is quite as sad as getting a free lunch that you can’t eat due to allergies or other restrictions.
- Recognize the value of having your employees in the office during what would otherwise be an hour-long lunch. It also encourages mingling.
- If you’re having it catered, skip purchasing beverages from the caterer and stop by the grocers for 2 liters of soda pop or juice.
- Find some other great cheap catering ideas on this blog by ezcater
- Costco runs! There’s a reason Costco was created for businesses. They offer big batches of things your team might want, for reduced costs.
Shop around for Utility Options
From electric companies to the internet, stop paying the most expensive price!
While you may be stuck with certain utility prices, don’t automatically assume that the prices are a fixed cost.
Think ComcastInfinity is the only supplier of the internet? It’s not. Shop around, and see what other options you have. You might be surprised what some of the smaller companies are able to offer you without sacrificing internet speed.
Check out the rates you can get for electricity and stop paying more than you need to. Every penny counts when you’re a startup. Check out this calculator to directly compare electric rates near you.
Review your services
The larger your company grows, the more products and services you’ll likely be using.
Sit down and review the services that you’re paying for, and check to see what overlapping options some of the services you use have.
As an example, G-Suite has similar qualities to Dropbox which has overlapping features as OneDrive. While they each have unique features, chat with your team about what they would like to use most. If your team is set on using Microsoft, consider switching away from Gmail options, and so forth.
Jira and Burherd might have some differences, but do you really need both? Again, talk with your dev team (this will help with morale as well since they’ll be part of the conversation) and see which features they find most useful before eventually making the cut. If you’re trying to weigh the pros and cons of bug tracking software, here’s a recent breakdown of three of the top used options by Capterra.
Don’t be afraid to pick up that phone, either. If you are in love with a product, but just can’t justify spending extra cash on it, check in with a salesperson and see if they have an unlisted less expensive product, or see if paying for a year in advance would reduce the price of the product.
Offer equity in lieu of salaries
Really need to cut your burn rate? If you’re this far down the list, it’s time to get down to the nitty-gritty. The biggest way to cut your spend or burn rate is to ask management and employees to change how they are compensated.
If you’ve founded the company, it’s likely you aren’t a stranger to not paying yourself, but if you haven’t broached the subject with your employees, it may be just time to do that.
Don’t phrase it as deferring a salary though, as this can compound problems down the road. Instead, be honest with employees and discuss several options, like reducing salaries with potential bonuses later on. If you’re not sure which one might be right for your company, consider these options.
It can be hard to have these conversations, especially when some of your most valuable assets are your key players. But here’s the thing: running a startup isn’t easy to begin with. Employee and management salaries are likely one of the highest costs of your business.
Not sure how to pay legal fees to draft up contracts? Some attorneys are open to taking equity as well. This isn’t ideal, but a good attorney will save you a huge headache in the long run.
These aren’t the places to be frugal
So, as a startup, what are some places you should not skimp on cash?
The most important thing to remember in a startup is that you’re providing a service or product to customers, which means you need to continue servicing your customers at all costs. This is not the place to cut costs.
Secondly, sales. Prospecting for new clients can not be something put aside, and that may mean paying your sales guy -or team- while everyone else has their salaries differed.
And, finally, your company must continue making forward progress; this is true for physical products as well as internet-based companies. When you stop forward-progress, you may as well shut the doors.
Here’s a reminder that you know well: you can’t be afraid to spend money to make money if you want a successful startup. A perception of a company in trouble can end a sales deal, and desperation is not how you sell a product or speak with investors. Even when you’re pinching pennies, there are times you need to spend money.