When building a startup, keeping the lights on can be a challenge sometimes. A lot of startups are cash strapped, and 29% of startups have folded due to not having enough cash flow. Making sure you have enough cash flow during the early days of your startup can really pay off if the idea turns out to be a success later, so let’s explore how you can save money as a startup.
Incentivise your team correctly
As a new startup, money is going to be tight, and you will probably not be able to pay your employees market leading salaries. That’s okay though, because you have something, employees might find just as valuable as a salary… equity!
Employees who come into the business right at the start will often be hungry for the business to succeed and will hopefully see the growth potential of the business. Offering them a percentage of the business early on, in exchange for a lower-than-average salary, can often make an employee more incentivised, providing they can see the big picture and understand what their equity could be worth.
Let’s take an example. A candidate is up for two roles, one which is offering £30,000 a year, and one that offers £20,000 a year, but that employee gets 1% equity right at the start of the company. If the business ends up selling in both scenarios in five years’ time for £10 million, if they accepted the higher salary, they would get nothing, but if they had taken the job with equity, they could potentially walk away with £100,000. If you are going to offer equity, make sure you know that your employee is focused on the growth potential of the company.
Don’t worry about office costs
In today’s world, offices are a thing of the past. Justine Gray from consumer finance startup Dollar Hand explained that “There is no need to have fancy offices, or even a coworking space, as it has been found that employees are just as productive in a home environment as they are in an office one.”
Co-working spaces when a business is starting out could amount to a large cost, with some costing £3,000-5,000 per month. Rather than doing this, make sure to have regular social events with your employees that cost significantly less, but also allows your team to meet their colleagues in person.
Use software wherever possible
The cost to hire an accountant, or an HR officer, or a legal representative can be astronomical for a startup. Luckily, there are plenty of software’s on the market that can allow you to hire someone on a temporary basis rather than full time to do the same job.
For example, Xero is a full accounting software, used by many small startups. Before Xero, people would have to use a full-time bookkeeper to manage their finances, but now they may just need to hire a bookkeeper for a few hours a month to manage the finances. The same goes for HR; it would be wise to consider efficient softwares such as CharlieHR until you have enough cash flow or employees to need to hire someone full time.
Utilise interns
Students on gap years or year in industry will often cost much less to hire than more experienced professionals. Of course, they won’t have the same level of experience, but they will have transferable skills to hopefully excel in any role you put them in, such as customer success, sales, or account management. Interns are always hungry to learn, succeed and impress as they may want to work with you again once they finish their degree.
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