Setting up a company can be very difficult. Apart from having adequate financing, you have to know how to choose the equipment well. If one of the two variables fail, the project will almost certainly disappear. Today we will focus on the financial issue and try to give some basic tips to reduce expenses in a startup. We all know that in the first months of any company, there are a lot of expenses. However, the budget is quite tight. That is why you have to juggle to stay afloat. Saving, even in small details, is the key to reducing expenses in a startup.

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Start-up – in many cases this could result in “great ideas, lots of energy, even more potential, little money”. When a company, a team, a product and an idea still have to establish themselves in a highly competitive market depending on the direction, financial resources are rarely available in abundance. According to a study by CB Insights, 29% of all startups fail because of money problems. Often these are caused by running costs. Use these tips to learn how to reduce them in detail.

1. Cost point: office space

The golden rule “Follow the Money” applies in every branch and every business area. You have to go where the potential customers are. This is where your office space comes in. It is clear that there are some useful advantages to locating your company’s headquarters in a location that brokers would advertise as “very well developed in terms of infrastructure”.

But especially concerning newly founded companies, it looks like that an optimal location is too expensive in most cases. Prestige can also develop into a boomerang: What should a customer think who wants to do business with your newly founded company that already resides as if you were on the stock exchange?

The representativeness of your premises should play a subordinate role in the early years of the start-up. Location, size and look should only be based on one maxim: “Allows optimal work at the lowest possible cost”. Accordingly, this can also be a home office – if you circumvent the legal cliffs. The necessary personal contact with customers can take place in another way – for example, with you or on “neutral ground”.

And if your entire business model is played on the Internet anyway, the location of the premises usually does not matter at all, then an old, inexpensive shop on the outskirts also works, provided that there is a good Internet connection.

2. Cost point: marketing

A lot of money can be spent wisely in marketing, be it for AdWords campaigns or ineffective measures by expensive marketing agencies. Here you should invest a lot of resources in the development of a good marketing strategy so that, taking into account the financial possibilities, the most targeted marketing channels are used, and the appropriate measures are taken.

In the first few months of foundation, you can try out what is free of charge. This varies greatly from branch to branch; a competitive analysis can be very useful here and help to find a strategy.

3. Cost point: manufacturing and production site

If your start-up is already somewhat advanced, the question may arise as to where the next production location should be located. It can be extremely advantageous to have a large central location from which your products are shipped, for example, from a cheap production country in the Far East. However, several locations are also conceivable for production facilities and logistically attractive:

Of course, this means a lot of logistical effort for your start-up, but it can be worthwhile to produce at many locations close to home.

4. Cost point: IT

For the basic IT equipment for a start-up, five-digit sums can easily be collected, even for a small start-up that only requires a handful of workstations. But you can still use the scissors-scissors for these essential basics.

It should all begin with thorough research into which services are necessary for your company – because if image processing is not required, it is sufficient to rely on simple and cheap IT in the form of commercially available computers. There is simply no need for professional equipment with professional performance, even if countless advisors claim this again and again.

It also includes checking to what extent you have to own hard drives at all. Founders, in particular, can save a lot through cloud computing. Some companies offer leasing contracts for the entire hardware – often including support. Such a solution usually ends with significantly lower IT costs.

The same applies to the software: Much of what a company needs today can also be obtained from open-source sources without license or subscription fees, for example:

• Open office
• Mozilla Thunderbird
• the image editing software
• the Ubuntu operating system

This software can also be used free of charge in commercial operations and also reduces the dependency on large companies such as Microsoft.

By the way: Of course, there is also the possibility to buy equipment from bankruptcy assets. Customs, as well as various private companies, offer this option to get high-quality IT at a fraction of the cost. The classified ads are also a good place to go to.

5. Cost point: personnel costs

There are start-ups where the founder can do everything on his own as a one-person entrepreneur. But the greater the demands and the wider the fields of activity, the higher the likelihood that you will get lost. Qualified employees relieve the burden immensely, improve productivity and are often vital for the functioning of a start-up.

To keep costs as low as possible, it is advisable to hire “good staff” that is a group of qualified, flexible and powerful performers. A start-up cannot afford to feed underperformers. Also, student assistants, mini-jobbers and interns can be recruited, who can be taken on as full-time employees with good performance.

Employees who can be used for a wide range of tasks are particularly efficient – especially if there is little money for personnel at the beginning and only a small team can be employed. In the critical initial phase, it can also make sense to hire external professionals for demanding special tasks specifically. For a limited period and driving certain project phases, it is usually cheaper to pay highly qualified freelancers instead of permanently employing personnel who may not have the necessary skills or who cannot specialize in other jobs due to their specialization.

Especially in phases of rapid growth, there is a risk that a structured personnel policy will fall by the wayside. Then new people are quickly needed and recruiting is thought too short-term. It can, therefore, be helpful to think about a sensible company structure in good time and to derive measures for personnel planning. With clearly defined job descriptions, you ensure that you find exactly the right candidate for the specific task area. Additional details on the requirement profile, such as certain soft skills that fit the company’s values, complement the whole and make it easier to find suitable applicants.

More tips for applicant search

There are so many options available to find the right applicants that you can quickly lose track of them. From the job exchange of the Federal Employment Agency to numerous online portals and industry-related job exchanges to social media platforms such as LinkedIn, the spectrum is greater than ever. The platform with which you can best achieve your goals is very much related to the qualifications and degrees you are looking for. Depending on the industry, only certain platforms are often used for application applications, and the search behavior of the applicants is then almost exclusively limited to these few portals. It is therefore recommended to research in advance which portals are most effective for which job advertisement. If in doubt, ask the relevant target group in relevant forums (e.g. lawyers, accountants, editors, etc. learn more on reducing your startup cost.

Conclusion

Reducing expenses in a startup does not imply always looking for the cheapest or not doing the proper maintenance of our work material. If your start-up usually does not have something, then it is abundant cash. And even the small available reserves often seep away due to unnecessary leaks in financial management. It is high time to prevent this: Here you can find out how you can reduce running and other costs.