One of the most important things startups must do is to keep their operational costs under control. They often don’t benefit from the same economies of scale as their bigger, more established competitors and therefore have to deal with usually slighter margins. This is why rises in overhead will hit them harder. Thankfully, most companies can reduce their running costs by monitoring their processes, making better decisions, and making some adjustments. Here are some simple ways to reduce startup costs.
One of the first things you should do would be to hire a good accountant. They will be able to see things you might not have spotted. Accountants often know more about a business than business owners and truly understand how much a business is left with after-sales. They might also be able to see areas where you’re overspending and give you possible solutions.
Think twice about buying new equipment. You can usually save by buying slightly used equipment instead. You can also limit your cash flow hit and maintenance costs by leasing equipment in many cases.
If you’ve never heard of professional employer organizations, or PEOs, then you should do your research on them as they could help you save on recruitment and HR management. Simply put, a PEO is an organization that hires employees on behalf of companies and “leases” employees to them. This allows companies to cut costs in many ways. They can offer better benefits as the PEO has greater purchasing power and can get better deals. It also transfers some of the employee-related liabilities to the PEO. If you want to know more about ‘what’s a PEO?’ G&A Partners is a great resource you could check out. You’ll learn exactly how they work, how to find a good one, and some of the benefits they have to offer to smaller businesses.
You also have to look at what you could automate in your organization. If you’re in manufacturing, check how much you’re paying humans to conduct certain tasks and see how much you’d have to spend on a machine. Automation starts paying for itself after a while, so you have to consider the costs of buying and maintaining equipment versus hiring an employee for the next few years to complete the same tasks.
Internal processes can also be automated to eliminate menial tasks. Invoicing, tax reporting, and even customer service can be automated at some level. This would allow you and your employees to have more free time and concentrate on core tasks. So, look at your operations and processes as a whole and see what could be automated without affecting the quality of your service/product or production.