Weekly update + how to save costs in a time of turbulence

Last week, I told you about the aggressive goal I set up for lemon.io. We have to reach +100 clients by the end of Mach. New client +1, churn -1. 

Finally, after 6 weeks, we got to a positive balance. At some point, it was (negative) -19 clients. Below is the update for the last 2 weeks:

In the last 4 months, we’ve lost 30% of our revenue and netted almost (negative) -$400k. To fix the leak and get back on our feet, I:

• Established an aggressive mode
• Started cutting costs on all fronts

If you have also had to cut costs, I hope my experience comes in handy:

1. Keep track of all expenses and monthly run expenses audit

A simple spreadsheet that records all subscriptions and licenses can help you monitor costs. In the early stages of a business, it's easy to keep track of expenses (like we did before). However, as the business grows, the costs can quickly multiply. With a proper accounting system, it can be easy to take advantage of opportunities to cancel services or overlook an upcoming payment deadline. Also, you might have unrecorded expenses inside teams departments, unexpected payments, or other costs that need to be visible at first glance.

2. Once you've established a record of all costs and a system for monitoring them, you can delve deeper into the details

Ask questions like:

• Which services are having the greatest impact? Which one can be switched off?
• Which ones can be downgraded?
• Is there a benefit to switching to an annual subscription (which is often cheaper)?

Search for alternatives where it makes sense, but keep in mind the balance between potential savings and the costs of the decision. In some cases, it may not be practical to switch to a cheaper option. For example, a service that costs $7 per month might seem like a small expense, but researching and deciding to switch could take more than an hour of your time and that of someone else. The direct costs of research and implementation, plus the opportunity costs of time spent on something more valuable, might make the switch more expensive.

3. Ask your team where you can save costs

Talk to the heads of departments and team leads holding the budgets. Ask for their ideas to reduce costs and increase company productivity:

• Can you outsource some team functions?
• Can you use automation of some processes inside teams and spend more time on demand generation?
• Can you switch to open-source software instead of paid tools for tech teams?
• Can we reduce the education or perks budget?
• Do you need to work with all agencies right now?

4. Strike a balance between cost-cutting and common sense

Cutting all subscriptions and services can result in significant savings, but it may compromise work efficiency. For example, a $15 monthly savings can add 4 hours of work per month for the sales team (for example). This translates to increased salary expenses and decreased time for customer engagement, making it an unwise decision.

5. Don’t be afraid to outsource 

From a pure business perspective, full-time employees can be expensive, particularly regarding benefits, insurance, and other overhead costs (which is very true for Europe and US). Hiring contractors is a more cost-effective option when your company needs to cut costs, as they only charge for the hours they work.

By bringing on an on-demand team, you can save costs, scale quickly, and downgrade when needed. This is especially true for development costs that can affect your budget.

Hate to plug, but if you want to cut costs on engineering, hire developers in Europe and LatAm through lemon.io. If you decide to, drop me a line, happy to give a discount.

6. Negotiate everything

Many expensive services don't list their prices; instead, they offer a call with their sales team. Please don't settle for their initial price offer. They are open to negotiation, which is a huge opportunity to save. For example, we negotiated a 15% discount on one of the services we purchased this year. That's a significant amount per year.

7. Ask for discounts from current vendors

When you have a list of current subscriptions, define the most expensive ones and ask for better terms. Many SaaS companies would prefer to keep you as a client and provide some discount for 6-12 months.

8. Utilize intermediaries

Purchasing through an intermediary can often result in savings, as they receive volume discounts they can pass on to you. However, it's important to remember that if you decide to switch intermediaries, you'll need to negotiate directly with each service again, as the discounts you receive are tied to the intermediary. We are still exploring the use of intermediaries, but some of the most popular ones include Google, AWS, and specialized services like sales automation.

9. Become aggressive with your marketing and sales

While it’s not about saving costs, doubling your demand efforts can help a lot! I establish an “aggressive mode” practice when I, as a founder, oversee all demand-generation efforts and personally participate in marketing. This helps my company to keep a strong focus on getting money in. 

I hope that my suggestions were useful and I’m keen on learning yours. 

How are you saving costs? I want to learn from you too.