Entrepreneurs face various challenges, but amid today’s global pandemic cash flow has proven to be one of the first. Indeed, cash flow was already one of the most important hurdles for startups, as founders have always struggled to determine their budget priorities.
Cutting costs or paying attention to certain elements in your budget is not about saving money, but rather about making smart choices for the future of your company. Using a cheaper supplier might save you some cents today, but cost you more time and resources in the future. Making smart choices is about building a sustainable and long term business.
So with no further ado, here are 5 ways to reduce your costs, which any startup can implement.
- Use OKRs and start creating processes
If you haven’t done so already, the first steps to take is to use OKRs. Objectives and Key Results (OKR) is a critical thinking framework and goal setting methodology which can help you align goals and ensure everyone is working collaboratively on goals that matter. Moreover, by using this framework you’ll be able to track outcomes. OKRs can be implemented at first by using spreadsheets, and, later on, an OKR software. OKR methodology differs from other goal-setting methodologies such as balanced scorecards, and KPIs. To learn more about OKRs, a good starting point is reading Radical Focus: Achieving Your Most Important Goals with Objectives and Key Results by Christina Wodtke. The book is told as a story that follows a struggling startup that turns things around by embracing OKRs. You can also watch Christina Wodtke tell the story of her book (27 minutes) here: Accomplish Big Goals With Objectives & Key Results.
Once you have created your OKRs, you’ll need to organize internal processes for your startup. These do not need to be complex structures but ensure a way of working. Kanban methodology might make sense for your business. Kanban, an agile methodology, is a method for managing the creation of products with an emphasis on continual delivery while not overburdening the development team. Like Scrum, Kanban is a process designed to help teams work together more effectively. Moreover, Kanban teams focus on reducing the time it takes to make a project (or user story) from start to finish. The team can do this by using a kanban board and continuously improving their flow of work. This goal-setting system has been employed by the likes of Google, Intel and Bono to set and execute on audacious goals, so there are a lot of resources out there you can check.
Using OKRs and a Kanban methodology will help you stay on track, work-integrated and faster, avoid unexpected situations in order words work efficiently and save money.
2. Go remote-first
Working from home directly impacts your startup and your employee bottom lines by reducing your team’s commuting costs, time lost to travel, utility costs and the space needed for your office.
Moreover, a recent study (June 2020) conducted by Tilburg University among 5,000 respondents from all over Europe shows that working from home pays off for employees. Respondents say it fits in better with their social preferences, that they can work more efficiently and have more control over their working day.
Depending on the size of your team, rules and regulations in your country and the working from home experience you had during the lockdown, you should consider remote work as a long term possibility. Choosing a remote-first set up can be challenging but is very much doable if you look at the example of thousands of startups that have done so in the last months or at the success of Gitlab or Hotjar with their all-remote model.
3. Invest in your employees
It’s true that hiring a team, especially one with specialized knowledge or in-demand skills can be costly, but hiring replacements is just as expensive – if not more. Moreover, a study of more than 600,000 researchers, entertainers, and athletes found that high performers are 400% more productive than average ones. Studies of businesses not only show similar results but also reveal that the gap rises with a job’s complexity. In complex roles such as the information and interaction intensive work of managers, software developers, and similar, high performers are 800% more productive.
And so, even though it’s not going to be easy, you need to invest in the best people and do your best to retain that talent. In doing so you’re avoiding future costs for replacement and are building a company for success.
Outsourcing is an easy way to cut costs without compromising on the various roles that you need in your team. Find the best partners to work with for finance, legal or design work. These contracts will allow you to focus on the core team and make sure you get the needed help and support from professionals for specific tasks. Before using digital platforms such as PeoplePerHour or Upwork, make sure to ask your network for recommendations. As a first step, it’s advisable to work with people that have a proven track record within your community.
5. Learn how to use digital marketing and PR to your advantage
Some of you might be lucky to have a co-founder or a member of the founding team who has marketing experience. If that is the case, do not underestimate his/her skills and do your best to support and start building your brand asap. Blogging, email marketing and social media should be your primary focus.
Once you have created an online presence which makes readers say “this is a great story, I want to know more”, you should focus on media relations. Learn how to write a media release, how to pitch to a journalist, how to present yourself in an interview and create a database of ten media platforms you consider the most important for your business growth. Stay focused and create a long term strategy and plan. One day you’ll hire a marketer and when that day comes, you’ll already have a story to tell and numbers to back it up. To learn more, check out the 5th episode of the EU-Startups Podcast with our Head of Content, Charlotte Tucker and Third Eye Media founder Clara Armand-Delille on PR for startups.
And always remember you’re not cutting costs just to save your budget at a specific moment in time, but to build a sustainable business, one that is solid enough to withstand all sorts of crises.