Every startup CEO should know how startups reduce costs. Whether there is a need to for better control of the burn rate or just a desire to better manage the startup, manage costs.
How startups reduce costs
- Bartering = Trading
In many cases you can barter or trade what you sell for goods and services that you need. Do not forget to ask your accountant how these transactions should be reported to the IRS or other tax authority. Try for a trade before each major purchase. Can you trade mailing lists or trade something else for their mailing list?
- Buy in bulk
Purchase repeat purchase items in bulk. Internet based wholesalers or Costco, Sam’s Club should be checked.
- Free items
Many Internet sites and others give away free software and other free products and services. Check to see if the quality matches your needs. WordPress.org is a great example
- Renting or borrowing
Do not buy until you know that you need to own it
- Auctions – especially for seized items including computers, other equipment, cars and trucks. Remember that eBay is not the only online auction house.
Watch for sales of items that are repeat purchases
- Used and refurbished
Sales on used and refurbished cell phones, computers, office furniture and vehicles are significant. John Gale has had excellent experiences purchasing refurbished high end printers in Silicon Valley and London
Always try to negotiate for business equipment and office supplies
- Change vendors
Always be on the lookout for better suppliers of everything. Reward good service.
- Always ask about guarantees
- Check your industry associations to see if they have initiatives to help members reduce costs. For example see the article Chip alliance forms “capital lite” group to reduce costs for semiconductor startups
- Many startup incubators have arranged discounts for their members
- One minor way to reduce marketing costs is to promote your startup on your e-mail signature line.
Spend wisely and continually seek purchase deals. Be sure that your mission critical activities are supported appropriately.