Starting a business is costly. Not everyone has enough money to support it in the beginning, which makes it important to cut down costs and follow a proper cost management strategy. Even opening a small business may cost several thousand dollars; if you plan to expand it again, you might have to dig deep into your pocket, which may cost you millions! But don’t be disheartened by these figures; Spanx founder Sara Blakely started her business in the 1990s with just $5,000 in savings, and just like her, Oprah Winfrey and Jeff Bezos are some other names who started their business from nothing.
Today in our blog, we have brought you 5 strategies that you can follow to cut down costs of your startup and build your dream startup.
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Why is cost management important?
As we have already discussed, building up your own startup can drain your savings, and if you don’t manage your expenses, it might be difficult to run your startup for a long time. As your startup grows, so will its needs along with the business environment, such as economic trends, market demand, customer demands, etc. So what earlier seemed to be an important business expense may now not be of any use, such as market research or feasibility studies, which, once done in the initial stages of business, may not be required further.
With proper cost management strategies, you can ensure that your business incurs no more costs than necessary, improving its financial performance.
Follow These 5 Steps To Cut Down Cost Of Your Startup
Minimizing the cost of your startup is a double-edged weapon. If you cut down costs strategically, it improves your profitability and reduces costs from the wrong department, which may dry your startup to bankruptcy. Follow the below steps to reduce your startup cost tactfully.
#1 Shift from Office Space to Remote Work
Covid-19 was like the silver lining for all young startups to cut down costs of their operations by providing their employees the flexibility of working from home. Office space has become a choice for business owners rather than a compulsory requirement. If you are a young startup, it is recommended that you provide your team with the flexibility to work from home. If you are concerned about the efficiency and effectiveness of the team, then there are certain tools, like Slack, Microsoft Teams, etc., that you can use to manage your team.
Even if you don’t want your team to work virtually, then you can rent out space rather than buy the place. This will drastically cut the costs of your startup, which could be used for other essential purposes.
#2 Leverage Automation
Leveraging the capability of emerging technology is an effective way of cutting down the costs of your startup. Upcoming technologies, such as ChatGpt, Gemini, Davin, etc., can be used to cut down costs of operations that are repetitive in nature and consume a lot of time. Similarly, a lot of automated tools and software can be used by startups to cut the cost of human labor and enable their team to focus on more growth-oriented tasks.
However, be mindful of the tools and software you subscribe to; do not get overboard with your subscriptions and start buying the ones that are difficult to understand and do not provide enough value to you.
#3 Secure a floating line of credit
Once in a lifetime, all startup owners must have gone through a phase where they must have met a liquidity crunch. No matter how profitable your startup might be, it will have its own summers and winters; for dealing with periods of liquidity crunch, we will recommend that you secure a floating line of credit. With a floating line of credit, you can borrow money whenever you want to. In order to avoid getting into bad deals just to meet your ends.
#4 Cash-back cards
Credit cards are a great way to cut down costs of your startup. These cards are perceived in the bad faith but can save you a tons of money if used wisely; for example, the founders of Airbnb exhausted their credit limits in the early days of the business venture. Because when you are about to start or are in a very early phase of your business venture, you make a lot of purchases for your office furniture, equipment, etc., using credit cards in these transactions can fetch you a sizeable amount of bonus, perks, and benefits.
#5 Social media
As we have already mentioned, utilizing emerging technology to grow your business is the most effective way to cut costs without killing your startup. There has been a noticeable trend in American usage of social media platforms such as TikTok, Facebook, and Instagram in their leisure time. This can effectively generate more leads and maximize your reach at minimal or zero cost.
Strategic Growth, Efficient Costs
In our blog, we have mentioned some of the best strategies to cut down costs of your business operations; however, it is important that you prioritize your startup growth over cost-cutting. Sometimes, while cutting down on costs, we may trim our own growth.
