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Do you know exactly how much money you are spending each month in your business?
If you are like most entrepreneurs, the answer is probably no.
While setting budgets and auditing your expenses aren’t exactly the most exciting tasks, they can have a huge impact on how profitable your business is.
In this post, we’re sharing 9 cost-saving strategies you can implement, including:
One of the biggest expenses that most companies have is office space.If there is one thing the COVID-19 pandemic has taught us, there are A LOT more people who can do their job from home than some thought.
So, it would make sense that the number one most efficient cost-cutting strategy from our survey findings was encouraging remote work.
This means that you can either eliminate your office space costs altogether or significantly reduce them by downsizing your space.
“The most successful cost reduction we have implemented in our startup has been, by far, moving from expensive long-term office leases to remote work and co-working space,” says Ryan Patterson of JobSage. “Our young employees love the social atmosphere of co-working and everyone (especially our employees who are parents) love the option of working from home. This allows us to easily scale as we hire new employees without an expensive lease, which is generally one of the largest costs for a startup company.”
Anthony Martin of Choice Mutual adds, “The first option you have as a business today because of the consequences of the pandemic is to switch to a home office instead of renting office space. If your business has a larger presence online with little to no requirements for face-to-face customer interactions, then you could enable remote working and save costs by avoiding office rent. At the very least, you could opt for a smaller office space for those who still need to show up to work and let your other employees work from home. Another tactic that has gone very well for me is the use of automation software. I use book-keeping and workflow management software to cut costs, reduce errors and save time. In turn, this also helps my employees with productivity by getting mundane tasks out of the way and letting them focus on critical thinking. Workflow management software helps avoid unnecessary meetings, thereby saving time.”
Along with office space, the other big expense is your team’s salaries and benefit packages.
For example, if you switch to a remote-first company, this means you now have access to a global talent pool. If you have two candidates with equal talent and one lives in San Francisco and the other lives in Wichita, hiring the Wichita candidate makes more financial sense since you could pay them above-market rates for Kansas and still pay significantly less than what you’d have to pay the San Francisco person.
This is the approach that many companies, like Coalition Technologies, are taking.
“One of the ways we’re able to be more cost-efficient is by hiring team members from all over the world,” says Jordan Brannon of Coalition Technologies. “By not limiting our team members’ location, we have more options for hiring and we can work with the best people in the world. Having a remote workforce also enables us to minimize overhead and allocate more resources towards compensating our team members.”
Another approach that some companies are taking is to hire fractional executives.
Kristen McGarr of Adroit Insights explains, “By hiring fractional leadership instead of full-time, business owners are taking advantage of the knowledge and strategy gains achieved by larger companies without paying a price they cannot yet afford. Many businesses in growth mode can benefit from having a Chief Financial Officer, Chief Sales Officer, or Chief Operations Officer (often the business owner is filling these roles among many others), however, they cannot afford to bring them on full-time.
Fractional leaders come at a fraction of the cost, while still providing all the benefits for a growing business to achieve their growth goals that much faster.”
For example, it can cost upwards of $400,000 to hire a full-time Chief Financial Officer, a business doing less than $5 million in revenue can’t afford to hire a full-time CFO. However, they would benefit tremendously from a virtual CFO, who might charge anywhere from $1000 – $10,000 per month and works with multiple businesses.
Another way to save money on team costs is to hire agencies and freelancers for certain parts of your business.
“Outsource non-core activities,” says Shawn Plummer of The Annuity Expert. “This gives growing businesses a lot more flexibility to scale up with demand or cut costs as needed. You don’t have to hire as many full-time employees or leave people idle. Invest in automation. Automation can incur a short-term cost but can greatly improve efficiency in the long run. It can reduce costly mistakes and improve customer service because you reduce the risk of manual errors that can affect customers. Keep an eye on business expenses every month. Make sure you know what you’re spending on and whether it’s justified. This can help you identify wasted expenses quickly and cut them down.”
This often requires a mindset shift around productivity
Will Ward of Translation Equipment HQ explains, “The technique that brought us the biggest success in terms of cost reduction was addressing our perspective on productivity. Typically, productivity is judged by aiming for each employee to hit x amount of hours per day. In reality, the best way to measure both individual and collective productivity is to view productivity as dynamic.
As a remote team, we encourage our employees to use time tracking techniques, as well as be responsible for their own time division each week. We know that finding the right workflow, as well as taking plenty of breaks to exercise and recharge, are all key to actual productivity rates. The effect of shifting our perspective on what it means to be productive, and how we measure productivity and allow our employees to meet requirements, has been the single strongest boost to our cost reduction attempts.”
However, as many businesses have realized, it is possible to overdo it to the point that you end outsourcing too many tasks or the wrong ones and end up slowing your organization down.
Another way to save time is to get clear on what you and your team are actually spending your time on each day.
You’ll likely be able to carve out responsibilities and tasks that you can delegate to a team member or a freelancer. So, you can spend more time on the biggest impact tasks.
“In my experience taking time to sit down and evaluate nonessential activities that can be outsourced can yield excellent results,” says Benjamin Sweeney of ClydeBank Media LLC. “Not everything that your organization does in a day is closely tied to the aspect of your business that generates revenue.
Customer service, billing, admin work, warehousing, and transportation are all business aspects that may support your revenue creating centers but might be more efficiently (and cheaply) run by a third party who specializes in those activities.”
It’s not easy to know which KPIs to track for sales, marketing, and customer success in a SaaS company. There are many possibilities, and so much to do! Why not start with the basic metrics that determine the health of your company?
If you want to track these in Stripe, you can do it easily by building a plug-and-play dashboard that takes your Stripe customer data and automatically visualizes the right metrics to allow you to monitor your SaaS revenue performance at a glance.
You can easily set it up in just a few clicks – no coding required.
To set up this Stripe dashboard, follow these 3 simple steps:
Step 1: Get the template
Step 2: Connect your Stripe account with Databox.
Step 3: Watch your dashboard populate in seconds.
By auditing your time, you’ll also likely find repetitive tasks that can be automated.
“Test tools to automate your processes, gain time and do less repetitive tasks,” says Jonathan Aufray of Growth Hackers. “It might sound counterintuitive but to reduce costs, you might need to invest in tools. Don’t worry, a lot of SaaS have free trials so you don’t have to pay anything upfront and you can only pay for tools that help you reduce costs.
What you want to do is find tasks that you or your team do that are time-consuming and repetitive. Once you know those, find tools that solve those specific problems. Then, try a few of those tools to find out which one fits what you’re looking for. Once you find the right software, your processes will start to be more automated, you will have more time to spend on things that matter rather than repetitive tasks.”
Andrew Ruditser of Maxburst adds, “Some automation tools like Zapier and Hexomatic that can automate and streamline your workflow are beneficial in cutting costs. While yes, tools like these have an upfront cost, they can save hours on multiple tasks connecting multiple apps at one time, which will result in a smaller number of employee resources and pay needed to work on these projects.”
You should also make a habit of reviewing your expenses in your cloud accounting automation software on a regular basis. In particular, SaaS subscriptions can add up quickly especially as your team grows. It is not uncommon to realize you are paying for a bunch of SaaS apps that no one uses anymore or that you have like 5 separate Zapier accounts (that could be consolidated!)
“One simple thing every business should do is outline all their expenses,” says Sasha Matviienko of Citadel. “It’s unbelievable how many companies miss this simple opportunity. This can potentially provide large savings, especially for service-based companies that don’t have production costs.”
Another place where you can save money is only paying for cloud storage and servers that you actually need.
“The best cost reduction technique for a SaaS is to not pay for unused cloud data,” says Chelsea Cohen of SoStocked. “Only pay for the cloud space that you need and expand when required to do so.”
Another key area where you can save money, especially if you are a large remote team, is IT support.
“According to my experience, decentralizing IT support is one cost reduction technique that has proved to be most successful for a growing business,” says Jessica Robinson of The Speaking Polymath. “Having individual IT support and its maintenance is a costly affair. Along with this, hiring IT professionals to manage functions related to IT support and maintenance makes it even more costly.
Apart from salaries, companies also have to offer different types of benefits to them. On the other hand, an IT support service provider can save companies from bearing huge costs and take care of IT outcomes at much lower prices. They don’t even have to offer the IT Service company any sort of benefits, which also saves money. So, I feel that decentralizing IT is a successful cost reduction technique for growing businesses.”
You can also save money on development costs by using no-code tools whenever possible like for building MVPs or landing pages.
“Switching from traditional development to no-code tools has proven the most efficient cost-reduction technique in my experience,” says Lucie Loubet of Designware. “Particularly for tech companies and agencies. Research shows that web development, mobile development, and automation projects are 4.6X less expensive and 4.8X faster to execute with no-code tools. I’ve personally mandated development agencies to create $30,000 websites in the past. Those websites turned out average-looking and hard to maintain. Using no-code tools, I am now able to achieve better results for a fraction of the cost.”
For larger businesses, streamlining your tech stack by using an Enterprise Resource Planning platform (ERP) can make sense.
“Whether it’s a start-up or an established business, keeping costs under control is what ensures a higher profit margin,” says Eden Cheng of PeopleFinderFree. “I always find ERP or Enterprise Resource Planning effective to keep costs under control. It’s a sort of automated inventory control helping businesses to prevent the hoarding of the resources, wastage where the product comes with an expiry date, and optimized use of every hired resource. If you’re in manufacturing or good dealing then ERP can help you keep your operational cost under control. As today’s high ERP systems come with CRM and SCM integration, it allows businesses to reduce the cost without impacting the service delivery. Usage of this tool gives businesses a clarity of need of resources and invest only in the essential ones.”
The two biggest cost savings areas are office space and headcount. However, there is only some traction you can make there. Once you’ve done that, it is all about the basics of auditing your time and expenses.
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