A large number of startups fail because they do not know how to control costs relative to their income. Others lose out on potential profits because their costs are higher than necessary, while cutting expenses necessary for operations hurts your business’ ability to meet its commitments. Here are six easy ways to cut start up costs that won’t hurt your quality, capabilities or customers.

Hire Talent Strategically

Identify the skill sets you need, and hire people as you need them. Instead of adding people to the permanent payroll, utilize virtual assistants, freelancers available through various platforms and contract labor as required. Limit full time hiring to core talent you cannot afford to lose.

Do not use your business as an employment firm for your friends. Hire people with the skills and experience you need when you need them. It is better to hire a patent attorney who costs more per hour than a friend or family member with family law experience.

Select a web designer who creates perfect landing pages or software developer who builds functional apps the first time instead of letting someone build beta versions on your limited budget. Work with an accountant who understands the tax issues you will face before you need to file your first quarterly tax return. And don’t give away equity in your new business in an effort to reduce payroll costs now, since this will cost you decision making authority and standing with investors later.

Hiring college students and interns may let you tap into quality talent for a low price, though they should be able to demonstrate how they will help the bottom line from the get-go. However, you should never hand off business critical functions to the inexperienced, since the cost to your business if they don’t deliver something good enough is too high.

Cut Overhead Costs Without Sacrificing Capability

Ditch your landline and switch to VoIP if you have a good quality internet connection. The cost of a landline phone number for a single person seems reasonable, but the cost for a growing company can soon become burdensome. In contrast, small business phone service providers providing VoIP charge you based on usage, not the number of potential users.

Set up your business on virtual desktops so that you pay for software licenses based on the number of “seats” or continuous users instead of the number of employees. For example, though you may have five designers, you may be able to run your business off of three licenses since not all of your designers may be logged into the 3D drafting tool at the same time. Use tools for virtual meetings to reduce travel costs without limiting your ability to reach prospects. Utilize open source software as long as it doesn’t interfere with your ability to interface with suppliers and customers. For example, a small open source Microsoft Word alternative isn’t worth it if no one else can open the files.

Don’t forget to manage recurring expenses like rent. Run your business out of your home as long as possible, though businesses serving customers may not be allowed to operate out of a residential address. When you need to rent office space, select a location based on what you can afford to pay. Retail businesses need storefronts and access to pedestrian flow, but service providers may be able to rent the second floor of a strip center at a bargain rate.

Limiting your company’s headcount through the strategic use of freelancers, contractors and virtual workers as your company grows lets you delay the day you have to move into bigger quarters. An ideal situation is finding commercial real estate that lets you rent additional rooms or the larger space next door at a discount if you have been renting space from them since the beginning.

Avoid changing your business address, whether or not you actually move. Every address change requires updating contact information on your website and repeating the process of building up your local SEO presence. It also entails updating stationary and business cards.

Instead of buying new equipment or facilities, consider leasing what you need. For example, rent out space in a commercial kitchen to support your foray into catering. Hire third party manufacturers to make your new products so that you aren’t saddled with the cost of equipment.

Consider Offering Equity in Exchange for Services

A problem many startup entrepreneurs have is being too overprotective with their equity. Exchanging equity for services is a great way to cut on initial costs. Many people have difficulty keeping up with their expenses because of the sheer number of people on payroll. It’s always better to give up a little equity when you’re first starting than ending up with a pile of useless shares because you’re deep in debt. Offering a little equity to a few key players early on will eventually pay back in spades.

Track Your Expenses

Small businesses tend to focus on sales and big expenses while ignoring the little costs that add up over time. Free coffee to customers is a small way of showing them that you care, but free coffee and snacks to your employees could be draining money you could use to hire another contractor for a value-added project. Instead of micromanaging the little expenses, give regular reports on budget categories and ask your employees and contractors for advice on managing them better. You could get tips on how to save on printing costs, reducing manufacturing waste or improving productivity that you wouldn’t otherwise receive.

Also try to cut your overhead costs by making minor adjustments such as reducing your energy bill by switching to laptops only. Computers consume much more energy than people assume and doing this minor switch could significantly reduce your energy costs. Other small things you could do to reduce your utility bills include switching to fluorescent lights, installing a smart thermostat and using alternative energy as much as you can.

When you can, try to buy second hand or refurbished equipment or furniture. Buying brand new equipment isn’t always necessary, especially when talking about hardware.

Invest in Smart Marketing

Let’s be honest – your product or service is not for everyone. Overly broad marketing wastes money, since you are soliciting to people who won’t buy your product or service. Smart marketing means marketing to your ideal customer at the right stage in the sales funnel. Perform in depth research to identify your ideal customer, and work with marketers to reach your most profitable customer segment. Test your messaging early, when you can afford to make mistakes trying to find out what type of wording results in signups for marketing newsletters. You’ll have to build brand awareness and create a following of your ideal customer market before you start selling your product if you want to enjoy strong sales when it does reach the market.

Instead of going for costly print or media campaigns, try to see if you can market your business online instead. Online marketing is laser targeted and one of the advantages is that you don’t have to spend a lot of money before you realize your campaign is unsuccessful. Some smart split testing can go a long way, even with a limited budget.

Facebook and YouTube are two great options if you’re just getting started. Something as simple as posting a few videos on YouTube and sharing them with the right set of eyes on social media can work wonders for your business. Join as many liked minded groups and preach the gospel wherever you are.

Also, use this opportunity to test your products with prospective clients. As a startup owner, you won’t always have the means to test your product through focus groups. Try to gauge your market and see if your product or service is filling a definite need in the market.

Pooling

Small businesses that join business associations or purchasing pools can take advantage of the savings that come from bulk buying. Several businesses coming together to buy health insurance, dental insurance or other employee benefits is one example. Another option is working through suppliers for IT hardware and office supplies to see significant cost savings. This requires planning before you start buying in bulk, and it usually requires a commitment on your part before suppliers give you significant discounts.

Conclusion

Hire exactly who you need when you need them, based on their ability to deliver instead of their hourly rate. Use contractors and freelancers for everything except your core competencies. Look for the lowest prices on everything from software to real estate without sacrificing your ability to deliver to your customers. Track your expenses, but ask for advice to save on them instead of spending valuable time and money trying to micromanage costs with a low ROI for the effort. Invest in marketing early so you can maximize sales once your product hits the market. And finally, join with other businesses to take advantage of group discounts.