Every startup spends >80% of their money on 3 things: Payroll, Rent, and Contractors. If you can save money there, you’ll hack your burn rate. Anything other than these three things is a waste of your time, eg saving $250 month by moving from Anna’s Janitorial to Martha’s Janitorial. Please don’t analyze anything else if you’re trying to save money. To review:
- Payroll: people are expensive. Hire the very best people that you can and pay them well. Always take quality of people over quantity. As David Barrett trumpets in this article, more people does not equal more output, it means more overhead.
- Rent: rent is expensive, so consider having a remote office or headquartering in a city other than San Francisco or New York. Austin and Portland have a blazing hot startup scene for this very reason.
- Contractors: contractors are expensive… but less so than employees. You don’t have to manage additional rent/desk space, equipment, or training. The trouble is, they might not be loyal or responsive.
Little known startup burn hack: A recent new tax law allows many unprofitable startups to reduce their burn (by slashing their payroll taxes!) - up to $250K per year! Use this calculator to estimate how much you could cut your burn with an R&D tax credit study. That’s a legit hack to cut your startup’s burn!
Vanessa Kruze, a seasoned CPA, has an impressive track record prior to establishing Kruze Consulting. Her experience includes pivotal roles at Deloitte Tax and as a controller for a substantial startup with over 120 employees and $20 million in revenue. Under her leadership, Kruze Consulting has emerged as a distinguished CPA firm, recognized on the Inc 5000 list for five consecutive years, illustrating rapid growth and success in the competitive accounting landscape. Vanessa's unique approach, combining deep industry knowledge with advanced automation and software solutions, has positioned her firm as a leader in providing comprehensive accounting services to startups across the United States.
