Sample this bit of statistic that entrepreneurs find it hard to swallow – only 1 out of 5 companies make it to their 10th anniversary. Also, only a handful of them live to see beyond the 5th year after having begun operations.
Make no mistake, these are grim numbers and can be demotivating, even for the most battle-hardened of entrepreneurs. That being said, leaders and businessmen of today are becoming increasingly wary of all the factors that can hurt their chances of success. These primarily include an intensely competitive environment, poor managerial skills, lack of expertise (technical and operational), and a dearth of finances.
One of the most critical bottlenecks of a start-up is to calculate precisely the funds it would need to get off the ground. According to this research that was conducted across 150 failed ventures, the most common reason for prematurely shutting down operations was drying up of funds.
With that in mind, let’s look at six innovative ways your start-up can check costs so that you can boost your chances of long-term success:
1. Moving to co-working spaces
Leading app cab service Uber started from a co-working space based out of San Francisco. So did Instagram.
Smart entrepreneurs today are capitalizing on the trend of shared working spaces rather than spending a fortune on office rent and overheads. Based on data provided by Statista.com, the increase in the number of people signing up for co-working spaces has been exponential. From a mere 21,000 in 2010 to 16, 90,000 by the end of 2018, the rise has been a staggering 7947%!
Moreover, it is predicted that a whopping 5.1 million people would be operating out of co-working spaces by 2022.
Co-working spaces allow you to pay for only the space you need. Plus, flexible agreements mean you can scale at your own pace, without the pressure or rigidity of long-term traditional leases—and this flexibility is absolutely essential for start-ups. This way, you can save money and spend it on more critical aspects.
In addition to flexibility and cost saving, a co-work space promotes business growth through networking opportunities due to connection with like-minded people.
2. Getting work done by freelancers
The gig economy (comprising of freelancers and contractual employees) is growing faster than ever. According to this study, workers in developing nations report a significant part of their income being generated by gig work. In India, 8% of the employees earn their primary income through gig work.
Today, start-ups and solo entrepreneurs constitute the major job providers for remote employees and freelancers. That’s precisely because most ventures have limited finances to work with, and therefore, cannot afford a team of professionals with the right skill sets.
The good part is that freelancers can significantly contribute to your start-up’s marketing efforts. For an affordable sum, you can have a long-form article written by them, or run social media campaigns.
As a forward-thinking entrepreneur, you must know about the cost benefits that the gig economy has on offer; not to mention the role they play in growing your business. However, as your business matures with time, you should shift from generic freelancers to their specialist counterparts.
3. Going paperless
Most dynamic start-ups today are turning paperless not only to simplify processes but also save money.This research presents the actual cost of using paper documents. An average employee spends almost 50% of their time sifting through papers, and another 15% of their time reading up the information.
Within the traditional paper-based set-up, companies spend almost a whopping Rs.18 lakhs to fill up their cabinets with papers, and another Rs.1.5 lakhs annually to maintain the same.
A smooth transition to digital processes is no longer tedious or expensive. Cost of scanning documents and electronic storage for future use has become virtually free.
4. Capitalizing on the cloud
Cloud computing -- comprising a suite of services like computing, networking and storage -- has transformed the way entrepreneurs go about setting up and managing IT resources. With scalable and inexpensive cloud computing services like Microsoft Azure and Amazon Web Services offering cost-effective and reliable alternatives, it has become easier for start-ups to cash in on this trend.
With cloud computing, scaling is more straightforward. Depending on your start-up’s requirements, you can easily manage the number of servers, storage capacity and processing power. Importantly, you don’t need to set up a dedicated IT vertical considering the managed service providers can update all your core business applications and servers.
5. Making the best of social media
An entrepreneur needs early adopters to promote and market their product or service. Where could one find these early adopters? Customers' attention no doubt has moved away from television, newspapers and billboards to smart phones. Within smart phones, it is concentrated in a few apps which these early adopters may use.
Traditional methods of advertising are also incredibly expensive and ineffective. Moreover, if this Forbes report is anything to go by, as much as 84% of the millennials don’t trust the advertisements they see on television channels. Further, almost 71% of buying decisions are influenced by a handful of apps like Facebook and Twitter.
A robust social media campaign helps you to save on money otherwise spent on professionals and ad consultants. You don’t need to rely on a third party’s opinion. Also, you are more likely to do it yourself or outsource your campaigns to freelancers at affordable rates.
Another idea is to spot influencers – social media users who have tens of thousands of followers -- in your ecosystem. Make the best of them as they introduce your start-up to your audience, generally by reviewing the products and services that you offer.
This study shows that a significant 17% of the companies spent more than half of their marketing budgets on influencers, a statistic that is only expected to grow. Moreover, 89% of them reported comparable or better ROIs from influencer marketing.
6. Putting work on auto-pilot
Hiring people and managing them is much more expensive than deploying technology. Scores of start-ups today are finding newer ways to mechanize business processes in a bid to save the two most vital resources – finances and time. For example, companies like Breezy HR provides end-to-end AI-powered recruiting software that makes selecting candidates a cakewalk for organisations across the globe. Similarly, scores of financial advisors are leveraging a combination of AI and VUI (e.g. Alexa) to deploy robo advisors to both scale up their operations and take emotions out of advisory, a big challenge for most human advisors.
To put it in context, a start-up grows through a loyal customer base. For that, top-bracket customer service is essential. However, you cannot hire more than what you require. For instance, if you are selling software, a development team is indispensable. However, a customer support executive is not. Many start-ups are using chatbots to address customer queries and grievances round the clock.
Budding entrepreneurs are high on passion, creativity and enthusiasm. However, most of the times, the one stumbling block is money. The six unique modes of reducing start-up costs mentioned above can help you better your business’s viability.
However, amid all the cost-cutting measures, don’t forget the basics:
· Prioritize (and then prioritize a little more)
If you think you can do without new equipment, so be it. Get them on rent or buy second-hand
· Don’t forget the recurring and variable expenses
I am talking about internet fees, office supplies, and maintenance. Maintain a buffer in your calculations initially
· Make sure the money comes in as soon as possible
If you can get something to market, do it. It is good to have a revenue stream in place early. Make sure payments are coming in. Establish fair terms and conditions with your clients to ensure sustainable cash flow.
· Be ready to trade-off
I am talking about swapping accounting services for marketing services. You can save money and build great contacts along the way.