Startups are the driving force behind innovation, but in order to change the world on a budget, you’ve got to keep sharp. Making the most of your budget isn’t at the core of innovation, however, it is an important task to keep in mind when running a bootstrapped operation. With only 1:10 success ratio for most startups every cent counts and plenty of them start with nothing at all, just look at Basecamp, a classic example.
By leveraging your existing skills you can negotiate and analyze your spending to identify and reduce bulk. This lets you free up precious resources to drive your vision into becoming a reality. Here are a few things that anyone running a startup should pay attention to when trying to budget effectively.
There are plenty of ways to save when it comes to your operations – while we all dream of an office straight out of “The Silicone Valley” there are several more cost-efficient options out in the market. If you can working from home with a remote team can ensure low overhead cost for your bootstrapped operations. You can also opt in for one of the many co-working spaces available around the world, where you can enjoy the out-of-home office environment as your team grows. Co-working spaces usually don’t have a lock-in on the contract, unlike corporate offices, and will allow you to be as agile as you need to be. Co-working spaces boost motivation too, based on a survey where 85% of respondents stated they were more motivated in this environment.
No longer reserved for big corporations, startups and other small businesses are now embracing global outsourcing to fuel growth while keeping cost down and staying flexible. In a 2016 Deloitte survey, 78% of those interviewed were positive about their outsourcing. The top cited reason for using outsourcing was as a cost-cutting tool. Companies can expect to pay about $70 per hour for US based developers, but based on a 2017 survey the average hourly rate for a freelance developer is $23. Outsourcing legacy functions like IT, Finance and HR enables startups to focus on generating greater results for their business and driving change in their industries.
3. Negotiate Better Terms
Once agreements and contracts with subcontractors come to an end, or at least the end of the term – it’s time to renegotiate. Once you’ve decided to continue using a certain service provider and are renewing a contract don’t resign without revisiting your terms. With services that are used on an ongoing basis, such as SaaS solutions or marketing services on retainer, run a quick competitor analysis and renegotiate the terms in your favor where possible. Subcontractors working on a project basis can be approached with a multi-project proposal where a bulk discount can be given. Try to see where a supplier can come towards you all while maintaining the working relationship.
4. Track and Manage Your Finances
Cash is king, based on a U.S. Bank study 82% of businesses fail because of poor cash management. Keeping on top of your expenses can sometimes be a major hassle, especially for a growing startup. Many companies end up paying for things they don’t use. Audit the products you use, and be ruthless where needed. First, make sure you know what you’ve got and who uses what. Then, check what is underutilized to see how you can make better use of it. Now it is time to start analyzing, is this tool or service not used because it doesn’t work well or maybe no one knows about it. Identify the issue and figure out what needs to be done to ensure that you make the most of what you pay for.
With your budget utilized to its best extent stay on top of how much is owed to you and how much you owe to contractors. Make sure to maintain a keen understanding of the incoming and outgoing cash flows, and keep these in mind when signing contracts and agreements with your subcontractors. Knowing what needs to be paid by when can help you avoid uncomfortable situations and strengthen business ties that you rely on.
Payoneer makes it easy to manage paying your global outsourced suppliers!
Watch the video below to learn more:
Learn more about the different options you have to pay your outsourced vendors!