Bootstrapping and bucks: Business cost optimization for startup and early stage technology companies
As an early stage company, your pricing can make or break you. Even if you’re competing against giant companies in your niche, business cost optimization can give your business an edge.
Cost optimization helps you streamline processes and increase your profitability. Unfortunately, many early stage companies neglect to optimize costs while they’re small. As businesses scale, the costs grow unchecked, increasing the likelihood of financial problems.
Don’t create problems for yourself down the road. Do cost optimization with a trusted advisor while your company grows. You can cut your operating costs as much as 20% and improve your business in the process.
What is business cost optimization?
Business cost optimization is the key to profitability for your company. It’s a process that cuts business costs without affecting your company’s performance or quality.
Essentially, cost optimization is about making smarter money choices for your business. This isn’t a frilly process, either.
In fact, many investors will expect you to have a cost optimization plan in place. If you’re trying to appeal to investors, you need a cost optimization plan.
Aside from attracting quality investors, cost optimization helps your business earn more money for less work.
How to optimize costs for early stage companies
Although you can DIY some cost optimization, it’s best left up to a neutral third-party, like a cost optimization advisor.
Here are five ways an advisor can implement cost optimization for your business.
1. Renegotiate contracts
You likely have a few contracts in place with vendors and clients. Unfortunately, without an advisor, many early stage companies sign contracts that are unfavorable for their business.
Look over your contract terms and costs. Can you save on your manufacturer’s contract? Are there discounts available for software you use? Can you buying more units to qualify for a lower price?
Cost savings in this arena mean increased profits for you. You’ll never know how much you can save unless you ask.
Custom orders are great for customers, but they’re taxing on your business’s efficiency and costs. You can’t do custom everything in a scalable business; it just won’t work.
Instead, standardize your process. You can still offer some facets of customization, but overall, your product needs to be as standardized as possible.
For example, you can let customers white label a software platform (customization), which is created through a standardized process on your end.
When you’re founding a startup, time is literally money. How much money and time are you wasting on meaningless tasks?
You can’t check email for two hours a day and expect your business to grow efficiently. Sometimes tasks like email are a lost opportunity; in this case, your time is more valuable chasing leads or making deals.
Consider outsourcing tedious or time-consuming tasks to put your time to its best use.
4. It’s all about your culture
Company culture is important to your early stage company’s success. You need two components to have a culture for cost optimization.
First, frugality is important. It’s okay to give your employees and co-founders some perks, but they can’t go wild with the company credit card.
Create systems so people stay accountable. Outline what is and isn’t a valid business expense so people can be good stewards of company funds.
As a founder, you need to follow this system to a tee. Create the culture you want to see by shopping for the lowest prices and cutting out unnecessary expenses.
Second, you need a culture of improvement. You want open-minded, critical thinkers on your time. As a startup, you probably already have this, but it can be easy to succumb to burnout as you scale.
Build a culture of improvement and growth from the get-go. This mindset helps your team constantly seek out efficiencies to improve your business.
5. Digitize manual work
Your employees’ time is so valuable. Don’t waste their salary on manual tasks. Create a process and flow for digitizing manual work.
Project management tools like Asana can lead your employees through a process so they drop fewer tasks.
If you’re savvy with code, consider AI solutions for automation. For example, you can use chatbot technology to give customers a great experience without hiring 50 sales reps. AI can also conduct data analysis and scan for anomalies.
Let the robots do the heavy lifting for you. These solutions are often cheaper and faster when a robot is at the helm.
The bottom line
Use funds wisely as you scale your early stage company. The key to growing a business is to optimize your costs as you grow. But don’t go it alone; sometimes it’s hard to optimize what’s right in front of you.
Instead, partner with a trusted, impartial advisor. The Hollines Group specializes in business cost optimization for your early stage company.