For a tech startup, one of the biggest challenges you face is, well, starting up. Getting out of the gates and developing your first product or selling your first service takes money – something most young entrepreneurs don’t have a lot of floating around. The good news is that you don’t need unlimited resources. With a little strategic ingenuity and common sense, you can reduce your upfront costs, save money, and better position your startup for long-term success. Here are a handful of methods:
1. Run a Virtual Office
If you’re really serious about saving money, you’ll learn to do without a traditional office with a hefty rent. There’s no reason a fresh startup needs a physical location. Depending on where you’re located, even a small office could run you anywhere from a few hundred to a few thousand dollars each month. By running a virtual office – or setting up workspaces in your own home – you can get just as much work done without the added expenses. Don’t forget, office space also calls for insurance, taxes, utilities, and other overhead expenses.
From a marketing and advertising perspective, you probably don’t need physical space. A domain name, website, and really good hosting should do the trick. If you run a virtual office for a few months and discover that you absolutely have to have a physical office, then you can start your search. “Should you need to expand your business to accommodate for staff and expansion, there will always be locations for rent and purchase,” says Zac Johnson on Credibly.com.
2. Hire Freelancers and Independent Contractors
Wouldn’t it be great to have a company full of motivated employees getting paid full salaries and benefits? Certainly! However, that’s not the best strategy for a startup – even if it fits into your budget. In today’s economy, there are ample opportunities to hire freelancers and independent contractors. And while these job titles may have come with negative connotations in decades past, many of today’s most talented professionals label themselves as freelancers or independent contractors.
The great thing about contractors is that you pay them for their output. If you don’t need them for a month, you don’t have to pay them for that month. They scale as you scale, and you’re not responsible for benefits or taxes. It’s extremely advantageous and allows you to develop business relationships outside of your business.
3. Rethink Automated Subscriptions
How many subscription services do you have? We’re talking about industry periodicals, software programs, online programs, website memberships, etc. The problem with these services is that they automatically rebill each month and you don’t even think twice about paying them, when the truth is many aren’t necessary.
Just ask serial entrepreneur Matt Mickiewicz about his experiences with recurring subscription services. “In the past we've uncovered a mobile phone account that no one had used for six months, a website optimization service that was overbilling us, and a CRM that we had switched away from months prior,” he said.
Set a goal – let’s say $100 – and see if you can eliminate unnecessary subscriptions adding up to this amount. While $100 a month may not seem like a lot, it adds up to more than $1,000 over the course of a year. What could your business do with an extra $1,000 laying around?
4. Buy Used
As a startup, you should never think about buying anything brand new. You don’t need expensive furniture, top of the line equipment, and shiny accessories. Instead, buy quality used items that work well and hold their value.
Think of it like a car. While there is a faction of people that buy new vehicles, the large majority prefer used cars. That’s because a new vehicle loses roughly 11 percent of its value as soon as it’s driven off the lot. Why pay that premium when you can find a gently used version at a much lower price point? The same is true for office equipment, machinery, furniture, etc. Buy used and stash away the savings.
5. Trade Services with Other Companies
Many successful startups make a habit out of bartering with other startups. For example, a restaurant startup may offer free food to a new accounting firm down the street that’s willing to meet with them for one hour each week. It’s a win-win for both businesses. Are there startups, or even established businesses in your area that would be willing to barter? It’s worth a try.
Operate Within Your Means
You’ll often hear people say it’s smart to “live within your means.” Well, it’s also smart for a business to operate within its means. This looks like spending smartly and saving money whenever possible. With these five tips, it’s easy to see that saving money isn’t as challenging as it may initially seem.
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