The business community is saturated with rags-to-riches stories. Indeed, these types of stories are a dime a dozen, but what we often don’t hear about are the hundreds of hours and thousands of dollars spent building a company. The dark underbelly of the startup world is full of untold stories of sky high burn rates and ugly bankruptcies.
Today, thanks to advancements in technology, you can build a company with a relatively low budget. Be smart, don’t become one of the untold stories.
Of course, building the world’s hottest startup is not cheap. In late 2015, NinjaOutreach, a blogger outreach software, passed the $8,333 in MRR (monthly recurring revenue) mark, which made it a 6 figure company. At the same time, the company ended every month with $2,000 in the red.
That’s not an uncommon situation.
When ConvertKit, an email marketing software, reached $25,000 in monthly revenue, the company only had $1,000 in the bank after expenses were paid.
But fortunately, there are many ways you can cut your expenses and still move forward. We’ve got 4 tips for you today, alongside tech solutions that will give you some financial breathing room.
1) Save $10,000 Per Employee by Opting for a Virtual Office
Business 2 Community reports that “by 2022, 1.87 billion people will be working remotely across the world” – partly because that means companies can save $10,000 on average every year for every full-time employee that works remotely instead of in a traditional office.
Source: Mitel via Business 2 Community
Your Tech Solutions
Asana lets you create projects, assign team members, prioritize tasks and track progress. Slack’s free plan lets you integrate up to 10 apps, plus communicate in group chats, one on one messages, and even phone calls.
2) Save 600% by Switching Your Website Builder
According to WebAct, a digital marketing agency that builds SMB sites, your company’s online home costs a lot of money too. Until not long ago, they built client websites on WordPress, but the high costs of what is known as a free platform were taking their toll.
In a conversation with Duda, WebAct’s President said his team builds an average of 84 websites a year. That means a lot of expenses, including developer hours, themes, plugins, admin maintenance, hosting and SSL certificates – to name a few – which amount to $281,088 a year.
As a result, they need to charge high prices just to keep their doors open, which makes it challenging for them to cross-sell complimentary services, like content development.
Your Tech Solution
How did they cut their costs?
It’s easier and faster to build and maintain websites on Duda, so you need less developer hours, and a bunch of the additional costs – including themes, SSL certificates and plugins – are included in the price.
In other words, the cost per website dropped from $3,346 to $553 – approximately 600% in savings.
3) Save $47,000+ by Becoming More Efficient
When ConvertKit was struggling with rapid growth and couldn’t get a line of credit, its founder Nathan Barry encouraged the support team, which constantly had over 250 tickets in queue, to reach inbox zero.
They moved from “a median of 24-30 hour response time… to [a] median one-hour response time by the next day,” he writes. This improvement in efficiency made Barry realize he didn’t need to hire another support employee as he previously intended to do.
PayScale reports that the “median pay for technical support specialists in the United States lies in the neighborhood of $47K per year.” That means Barry saved $47K/year just by increasing efficiency.
However, according to Forbes, that’s just the tip of the iceberg. Forbes reports that 64% of employees visit websites that have nothing to do with their job every day during work hours. 39% of them waste less than one hour a week, but 21% waste up to 5 hours a week, and 3% waste over 10 hours.
This adds up over the year and gets magnified during special occasions, like March Madness. “March Madness alone… costs US companies $175 million in wasted time in just the first two days,” reports Forbes.
Your Tech Solution
The logical thing to do here is to track how you and your employees spend your time, so you can see how to improve. But most people believe they don’t have time to track how they spend their time.
Fortunately, RescueTime does it for you for free. It tracks how much time you spend on websites and apps (on your desktop or mobile device), and emails you a weekly report, which you can compare to other reports from the past 3 months.
Or, for $54 a year, it will also track how you spend your time away from your computer (calls, meetings, etc), let you access unlimited report history, block websites that distract you, and cheer you on when you reach the goals you set.
4) Save Countless Dollars (and Your Business) by Managing Your Finances More Effectively
“9 out of 10 startups fail,” reports Fortune, adding that according to founders who closed their doors, “ran out of cash” was the #2 reason for that (#1 was “no market need”).
But Adam Toren, co-founder of Biz Warriors, says money can still be one of the top reasons your startup fails even if you have a lot of it. He writes that “excess capital often sends budgets out the door in favor of flashy offices, extra advertising, and speedy hiring,” and recommends that founders remember to save any extra cash they have, or invest it back in their business, “at least until you become confident that your startup has a steady flow of income.”
Your Tech Solution
The first two steps to managing your finances better is to make sure your billing is going well and to track expenses. FreshBooks is one of the best tools for that. It lets you send professional invoices and makes it easier to find out if there are any unpaid accounts. In addition, all it takes to log receipts of purchases is one quick scan with your phone, so there’s no worry you’ll forget anything.
Plus, if your business is in the US, you can integrate PayPal and pay only 50 cents for each payment you receive, no matter how much you charge. Compare that with the 3-4% commission PayPal charges per transaction, and you’ll see how much money you’ll be saving.
Dare Yourself to Save Money in Your Business This Year
When Paul Jarvis decided to build OfCourseBooks, he decided to show the world that true bootstrapping was possible. As he detailed in his article for TNW in early 2016, it cost him $1,125 “to go from idea to a functioning software product” and operate for one full month. Now that his company is up and running, it only costs him $45 to keep the lights on every month.
Jarvis himself points out that it’s not possible for every business to operate on such low costs. As he explains in his article, some products take longer to create and involve complex building and maintaining, or require skills you don’t have, and that, of course, impacts your business expenses.
But this shouldn’t stop you from prioritizing your cash flow this year and looking into where you can save more money, so you can invest more in your growth.
Featured Image Credit: Flickr
This post is part of our contributor series. It is written and published independently of TNW.