One of the biggest challenges when running a startup is managing your money. While you obviously need to invest in your business to grow it, it’s not smart to just throw money around without really understanding how that money is going to help your startup grow.
Improper cash flow management is one of the main reasons why small businesses fail, which is why you need to spend some time learning how to do it right.
Intrinsic to any strategy designed to manage business expenses are going to be cost reductions. But reducing costs doesn’t mean slowing growth.
If done properly, cost reduction can help make your business become leaner and more adaptable, and provide you with more capital to fuel growth by funding what works.
Here are seven ways you can cut costs and help your company grow more quickly.
We live in an age where technology can do almost anything for us. And it can almost always do it better and more efficiently, which is why automation is a great way for you to not only cut some of the costs associated with running your business but also help it grow.
Some examples of automation include:
Example #1: CRM Systems
CRM software can collect valuable information about your customers for much less than if you did it on your own, and this will help you pursue strategies that will actually succeed in making your business grow.
Don’t know where to start? Here you go:
- Nine Low-Cost CRMs Designed for Boostrapped Startups
- Five Cheap CRM Tools for On-th-Go Entrepreneurs
- Ten Simple CRM Software Tools for Solopreneurs
- Six Affordable CRMs for Early-Stage Startups
Example #2: Automated Analytics
Take Google Analytics for example. It has an entire section called “Acquisition” which provides you with info on how your website visitors found you.
You can see how many visitors come to your site after clicking on a link in search results (organic results), how many people come from links shared on social media, from other websites, from paid ads, and by typing your website directly into search.
Why is this important? If you do any marketing to raise awareness of your website, this section shows you which of marketing efforts are paying off.
Example #3: Accounting Software
Payroll and bookkeeping can be automated easily with accounting software. This will reduce the need for a full-time accounting staff while also reducing the risk of error. You can then take these savings and invest them into the business in areas that promise to produce growth.
Example #4: Chatbots & Sales Bots
Chatbots on your website can help you deliver fast, quality customer service while also collecting information about some of the problems your customers are facing when using your products and services. Having this insight can help you improve your customer experience and make sure you keep your business on track.
There are automated solutions for nearly every aspect of your business. And where chatbots help to automate your customer support, you can use sales bots to automate your sales process and improve the efficiency of your sales team.
Similar to automation, outsourcing, which is a multi-billion dollar industry, is a great way to reduce costs and boost growth. And this is especially true for business functions requiring large investments in infrastructure, such as customer service and IT.
Ensuring have professional customer service team in place is particularly important because it can actually help you learn about your customers. Keeping track of trends and identifying common issues can help you improve your products, which will result in growth, as well as delivering a top-notch customer experience.
Outsourcing is a great option if you don’t have the resources in-house.
3. Find Freelancers
Another good way to save is to make use of freelancers. Hiring people full-time is expensive, especially if you need people with special skills and experiences.
Freelancers are a good alternative because you only need to pay for the work being done, and you also don’t need to worry about providing them with benefits, which can cause your labor costs to skyrocket.
And if you’re lucky, then you may be able to find someone living in a country where living costs are lower, meaning they will charge less for similar services. It’s a win-win!
4. Referral & Affiliate Marketing
One of the primary drivers of growth will be your marketing campaigns. However, paying for content and advertising time can cause costs to skyrocket, so it’s important to try and find ways to attract people to your business without having to spend a bunch of money.
Two great ways to do this are referral programs and affiliate marketing.
Referral programs will still cost you money, as you may need to credit people for telling their friends about you, but this is well worth the expense, as people will always trust those they know more than advertisements or other marketing messages.
Affiliate marketing is great because you really only pay people when they succeed, and you only pay a commission based on what they sell. So if you’re spending a lot, know that it’s actually because you’re earning a lot.
5. Employee Advocacy
Similar to a referral program, consider launching an employee advocacy program. This is where you turn your employees into ambassadors for your brand, which helps to attract people in their social circles to your company.
This doesn’t really cost anything, which will help make your marketing efforts more successful without having to expand your budget. Plus, it has the added benefit of busting morale and strengthening your brand.
One thing you’ll always want to keep in mind when cutting costs is that there is a difference between income- and non-income producing business functions. You’ll want to be wary about cutting income-producing activities, as these cuts could result in a dip in revenues. But with non-income producing activities, don’t be afraid to slash away anything you consider excess.
And one of the biggest expenses most businesses incur that does not produce any income are utilities. This includes rent for office space, electricity, internet, water, heat, etc. And there are almost always ways for you to keep these expenses down.
If you have a call center you can save major money by using an affordable SIP trunking service.
Or, if you’re a smaller operation you could use a virtual office phone system that allows people the chance to do more remote work, which would reduce your need for office space and give you some extra cash to invest in the business.
7. Invest In Your Employees
The word “invest” doesn’t always sound like a way to cut costs, but in this instance it is. Look at your business and identify your skills’ gaps, and then look at how you fill those gaps. If you have to bring in a consultant or an outside specialist every time there’s a problem with your website, then this could be costing you money you don’t need to spend.
A good solution to this is to invest some money in helping your employees cover these skills gaps so that they can address these problems on their own.
You may need to take a hit in the beginning, but over time the savings that come from being able to handle these issues in-house is going to provide a real boost to your business.
The best way to tackle cost management and growth is to find ways to create more cash to invest in the business. And while all these tactics represent a good start, they are just that: a start.
To set your business up for long-term success, you need to build financial frugality and optimization into your company culture. This will get everyone looking for ways to save and make the company more profitable, something that is every startup owner’s dream.
Editor’s Note: This article is part of the startup tools blog series Run Your Business brought to you by the marketing team at UniTel Voice, the virtual phone system priced and designed for startups and small business owners, and the team at Broadband Search, a service focused on helping people find the best value internet service providers in your area.