Reducing your startup’s operating costs is essential for longevity

Cash flow management is already a challenge for startups, but COVID-19 isn’t making things any better. With unemployment rising and people spending less money on certain goods or services, new businesses are likely to suffer during this time. However, reducing operating expenses can help a startup stay afloat until operations return to normal.

Lowering overall operating costs can certainly affect your bottom line, especially when the impact of COVID-19 is felt. Also, reassessing the budget and allocating funds to different operations can keep essential parts of your business running. Read on to learn more about how to reduce your startup’s operating expenses while staying productive during COVID-19.

Review your budget with a new lens

When you created your budget for the year, the coronavirus was unlikely to be on your mind. And, with such rapid updates and changes in recent months, 2020 can feel like a great game to catch up with. Now that shelter-in-place ordinances are being lifted and people are venturing out into the world again, it’s a good time to reassess your operating budget.

Revenue projections likely need an update, and its outlook for 2021 is different now than it was a few months ago. From lower sales numbers to higher churn rates, you need to assess your budget priorities. However, it’s important to simply avoid cutting your budget. Wisely evaluating the numbers may indicate that some areas of your business are really improving during this time.

renegotiate contracts

The impact of COVID-19 is being felt across the country. If your business has changed, chances are others connected to you have done the same. You may be able to renegotiate terms or contracts during this time to give yourself a breather. From reducing office costs to eliminating subscriptions, there are a few steps you can take to avoid waste.

office space

If your company has switched to remote work, chances are you’re paying for empty office space. Your landlord may be willing to negotiate your terms due to the unprecedented circumstances. In some cases, shelter-in-place orders may prohibit you from working in the office entirely. Check your contract to see if there are provisions for a situation where the office space cannot be used.


Your startup likely has several active subscriptions. Whether you rely on monthly professional services like IT support or SaaS licenses to run your business, there may be room for cutbacks. Try to negotiate with your partners or providers to reduce subscription costs. You may have licenses you no longer use or termination fees that can be renegotiated.

Deferred Payments

In cases where you can’t reduce operating costs in numbers, ask for deferred payments. Extending the payment cycle can temporarily improve your cash flow and help you get through a rough patch.

Remove non-essential tools

When you reevaluate your budget, you may find that it’s skewed in one area. Go line by line to review the various tools and services used by your business, determine which ones are essential and which items can be cut. Reviewing financial statements is a great way to visualize where your budget is going, rather than assuming. You may have duplicate tools, tools that are no longer used, or items that can be replaced with a less expensive alternative.

Cut unnecessary licenses

Reviewing all the tools and services used by your team could also highlight which services have too many licenses. Are all licenses being used or can some be removed? Also, you may be paying for additional features that you could do without, at least for now. Lowering your subscription level or reducing the number of licenses could help reduce operating costs.

cut paper

While it may seem small, going paperless can help your bottom line. Businesses spend quite a bit on paper, printers, and ink every year. If your team works remotely, there’s even less reason to go paperless. When you return to the office, you can continue the habits formed during quarantine to reduce your business’ overall paper usage.

stay flexible

Things are likely to continue to change as we learn more about COVID-19 and its overall impact. There may be unlikely opportunities to reduce your operating expenses over time. The unpredictability of COVID-19 combined with the changing nature of startups makes it important to stay vigilant. You may find yourself considering new or innovative ideas that you may not have thought of before.

Assess more frequently

Regularly evaluating your budget and outlook can help you stay more nimble and flexible. As your startup changes and evolves, your operating costs must follow. Set up more frequent assessments to stay on top of your operating costs and adjust as needed.

Break large investments or projects

For many start-ups, cash flow is tight. COVID-19 is putting major purchases and projects on hold until businesses can stabilize. Instead of counting these breaks as losses, pay attention to the money you’re saving and the cash you’re making available.

new equipment

Were you planning to upgrade everyone’s laptops this year or buy a new phone system? COVID-19 may not be the right time to make large investments, such as buying new equipment. Instead, stick to buying only what is necessary. Look for used or refurbished items when possible to save on operating costs.

marketing initiatives

Unless your marketing initiatives are getting a positive ROI, it may be time to put big projects on hold. Instead of rolling out pre-scheduled campaigns, reevaluate your marketing calendar to determine what will move the needle for your business. If your customers are driving purchasing decisions, now might not be the time to invest in sales and marketing.

Use free trial periods

If you absolutely must buy a new service or equipment, take advantage of free trial periods. Make sure the provider is the right partner for you by testing their product or service early. In some cases, providers will negotiate the trial period if you really want to buy.

reduce payroll

Finally, reducing payroll can help reduce operating costs. Many startups see this as a last resort because it greatly affects their operational capacity and the individual lives of employees. However, in some cases, it is a necessary measure.

Implement a hiring freeze

You can take steps to reduce operating costs by implementing a hiring freeze. Avoid filling positions unless necessary. Your team may be down, but you can avoid deleting current positions this way.


Instead of hiring for new positions, subcontract when possible. For example, you may need financial guidance during COVID-19. You can hire a freelance CFO to work part-time at a lower cost than hiring an executive-level position. Companies like K-38 Consulting provide top-tier financial advisor services, and you only pay for services when you need them.

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