In a lot of cases, “startup” is practically synonymous with “short on cash.”
It’s just part of the process of building a business.
You can’t always start off with a ton of capital, and you actually don’t always have to.
For startups, saving money is a central focus.
Every dollar counts, and you’ll find yourself cutting costs wherever you can — without compromising the quality of your product, and without reducing the effectiveness of your marketing strategy.
Some of the biggest expenses for a startup company can include things like leasing office space, paying employee salaries, and other things that aren’t nearly as obvious.
Navigating all these costs can get pretty daunting, and they add up pretty fast.
There are a few tried and true strategies that you can use to help keep your startup’s costs down as much as you can.
Things like hiring remote staff instead of leasing office space, working with contractors whenever possible to reduce your tax burden, and other strategies can help you get the most out of every dollar you spend.
Reduce operating costs by working remotely.
For anyone who has calculated important business metrics like CAC (customer acquisition cost) or CTS (cost to serve), you will know just how hard it is to reduce fixed operating costs.
One way to alleviate these costs is by creating a company that employs remote workers.
Rather than needing to provide workers with office space, computer equipment, snacks and coffee, founders can avoid these money draining costs.
According to a Gallup poll on the state of the American workplace, 31 percent of employed Americans work remotely 80 to 100 percent of the time.
This is a 7 percent increase compared to findings from four years ago.
In short, working remotely is a phenomenon embraced by businesses and employees alike. It can be a great tactic for reducing overhead and therefore preserving cash.
Prioritize profitability over growth.
Today, both public and private companies tend to prioritize growth over profitability.
Founders of all kinds are constantly in search of the hockey stick graph that shows all numbers moving up and to the right on a steep slope.
But growth has its costs — one big one can be profitability.
For founders struggling to preserve cash, switching to a business model that leads to profitability sooner rather than later may be a smart decision.
Venture capitalist Fred Wilson wrote that biasing toward profitability can also improve business decisions generally:
“I also think the profit motive, generating more revenues each year than the expenses you are spending to do that, is a really valuable constraint on a management team. It forces them to think creatively and logically about the investments they want to make.”
Take advantage of tax breaks and incentives.
Some states have recently created tax incentives to encourage innovation.
Founders should be sure to spend time researching what tax breaks their business may qualify for to preserve cash.
In New York State, for example, startups that open an office on or near a college campus may be eligible to operate tax free for 10 years.
In addition to tax incentives, some government agencies such as the Small Business Administration (SBA) offer grants and seed funding to startups working on exciting research projects.
According to its website, the organization has contributed more than $2 billion to startups working on promising ideas.
When possible, hire contractors instead of full-time employees.
Freelancers or contractors provide businesses with a more scalable workforce.
As a bonus, these employees usually don’t expect the traditional benefits businesses must provide when hiring full-time employees.
Even Facebook and Google, companies that have plenty of cash on hand, have recently hired armies of contractors to manage various important tasks such as online moderation.
You can find more creative money-saving strategies over at Entrepreneur.