Many startups do not survive the first five years, but those who do often go on to do very well. According to stats from CB Insights, the first few years of a startup can be very demanding, up to 70% of start-up shut down in the first two years of operations. Out of that number, it was discovered that 29% of them failed due to the lack of cash in-flow.
The poor management of finances is the root cause of startup failures. Here are a few tips to seriously consider if you want to save money as a startup.
Apply lean management practices
Most startups spend on several totally “unnecessary” stuff in a bid to look the part. But this is where the decline begins. To be a successful startup, from the onset, you need to practice lean management. This will help you reduce your operating costs and get rid of things that do not add any real value in the interim. Take a critical look at what you need, such as office space and focus on them. If you are looking to save money on office space, check out Runway East for some great insights. In as much as you can, automate and save time and resources for the more essential aspects of your business. You should also consider using the cheaper versions of software and applications.
Run efficient and measurable marketing campaigns
Marketing campaigns are a great way to get exposed in your market and grow your clientele base. But marketing campaigns are costly, and you must be able to measure its impact on your business. Ensure that your team comes up with efficient and effective marketing campaign strategies that push your business and bring in profits in the end. Due to the presence of limited funds, ensure that marketing campaigns provide actionable data that will be used to enhance other campaigns in the future.
Make use of tax deductions and exemptions
Taxes may seem like one thing that will cost a startup, but a closer look will reveal opportunities to turn them into cash savings. Taxes are inevitable, and you will have to pay them, but tax reforms have created the chance to make some additional savings on your capital. Get a tax or financial advisor to go over the taxes that apply to your business and discover the opportunities that can help you save some money to re-invest into your business.
Properly structure your HR system
Managing a workforce is not easy, and you will need help to recruit and fill positions. This is the sole function of the HR system. Though a very important part of your startup, HR is often the culprit when it comes to depletion of resources. The recruitment process can be long and quite unpredictable and as such is prone to issues such as long and expensive recruitments, multiple job roles, and high employee turnovers. When you put the proper structures in place, your HR system will be efficient and will not drain valuable financial resources.
As a startup, cash flow is the only thing that will keep you in business and help you grow. Find innovative ways to save money by cutting down on unnecessary expenses. Also, be frugal now and establish yourself, and later you can have enough financial power for comfort.