How To Reduce Your Startup’s Operating Expenses

Farwah Jafri | August 30 2021

With the COVID-19 delta variant spreading rapidly and fueling new outbreaks in the U.S., economic recovery is expected to slow down again. For small businesses that are still establishing themselves, this can mean increased cash burn. One way to prevent this from happening is to reduce operating costs so you’re spending less money each month, thus lowering your burn rate.

When your startup is at its early stages, reducing operating expenses is not as difficult as it becomes later on. It is also an important decision that might just determine the success of your entire startup.

The goal is to reduce operating expenses without compromising on the quality and efficiency of your business as well as the customer experience.

Here are some practical tips to help you manage your startup on a budget.


Digital marketing to the rescue

Digital marketing has, in general, become one of the most popular ways to market your business because it allows companies to reach a wider target audience, and it’s more cost-effective.

Traditional methods like billboards, flyers, and TV and print media ads are extremely costly for a small business. Moreover, they have a smaller outreach, so you’re less likely to get the kind of returns you would through digital marketing.

Social media ads, however, allow you to personalize and display your content directly to your target audience. You also receive targeted feedback that helps you understand what strategy works best with your potential customers. You can also monitor your marketing campaign’s performance to see which tactics haven’t worked out and proceed to invest in those that have.


Upfront deductions reduce operating costs

During the planning stage of your business, make sure to define your expenses. Salaries, office expenses, benefits,  and so on are also operational costs that you need to keep in mind as you make sense of every deduction available.

Hire an accountant or an accountancy service that helps you ensure you’re utilizing every deduction possible. Auditing your expenses too will help you see if there is anything on the list that you can operate without, which is helpful during tax season.

When hiring a bookkeeping service to reduce operating costs, make sure you choose one that has plenty of reviews online and uses top-of-the-line inventory management tools as well as other accounting software.


Buying supplies in bulk

While buying office supplies in smaller amounts might seem cheaper, it tends to be more expensive in the long run. One way to reduce operating expenses is to buy supplies at a wholesale rate since most vendors offer reduced costs for bulk orders.

However, before you dive into buying supplies in bulk, take a count of what you need and what you don’t. Do some research on special deals and compare prices offered by different vendors. After you have a basic price list in your mind, approach them. Review the quality of the products with the price they are offering and then make the purchase.

Keep in mind the office space and storage space as you place a bulk order because without adequate space it will be difficult to manage inventory. Plus, try to pay invoices early or on time, chances are vendors will offer a discount on timely or early payments. Even if it is about 2-3% this will add up. Moreover, you will avoid paying penalties or late fees if you miss payments.


Outsource your business operations

Expanding your in-house team is not always the best option, especially if you’re on a tight budget. You will end up paying a lot of expenses for a new employee. However, a growing business will require more people on the team, so instead of hiring someone, outsource time-consuming yet critical financial management functions to experts.

Accounting and bookkeeping are important functions and help you with the financial insights you need to grow your business. Spending a significant amount of time and money looking for an experienced accounting resource who understands the dynamics of your business might not be worth it, especially in these testing economic times. Onboarding a one-stop financial advisory service provider expert in the field and having diverse industry experience is a wise decision and helps cut costs significantly. You are likely to get work of higher quality at lower costs.


Wait before making large investments

If you have some cash in your hand and want to make a big investment, pause before you make the payment. Update your revenue projections accordingly before you make any significant purchases. Everything has an ROI, even capital investments like office equipment. For example, investing in energy-efficient appliances that have a high initial cost but eventually help reduce the overall expenditure. There are many online systems and software programs that can automate and streamline a small business’s functions.

These systems are great for covering a number of operations like web hosting, marketing and communications, etc. The efficiency provided by such technology can reduce direct labor in multiple areas while making the process faster through AI.

This is important when you’re trying to reduce operating expenses. If your calculations show that you’re likely to see a dip in growth if you opt for the acquisition, then take some time before you make growth plans and wait for the market to stabilize.


Consider remote work

The pandemic has redefined the concept of working from the office and showed businesses across the world the possibility of working from home and away from the physical office. This has opened businesses up to the idea of remote work.

Not only do startups get to reduce their operating costs but many businesses have reported improved work quality. Remote work also improves the workers’ loyalty to the business as they believe the startup cares for their well-being as well. This means you have higher employee retention and you’re less likely to spend on new hires or training.

Remote work also allows you to spend less on office space, furnishings, office supplies, travel reimbursements, etc. This greatly reduces operational costs.



It is fair to say that the near future economic situation is unstable and is likely to prove difficult when it comes to business development. If you don’t pay close attention to your running costs and overall startup budget, you might run dry soon. Start with a solid business plan, keeping in mind that the goal is to reduce operating costs. It will help you test out ideas and cost-effective ventures.

See Also: Accounting 101 for Small Business Owners

While it might be tough to avoid some costs, you can trim them down. If you’re looking for a service to help you out with that, visit Monily and set up a free consultation with us to help you streamline your finances.

Author Bio

Farwah is the Product Owner of Monily. She has an MBA from Alliance Manchester Business School, UK. She is passionate about helping businesses overcome challenges that hamper their growth, which is why she is working at Monily to facilitate entrepreneurs to efficiently manage business finances and stay focused on growth.