How Startups Can Balance Cost and Scalability When Choosing Core Business Tools
Want to build a startup that grows without drowning in software bills?
Every founder dreams of tools that are inexpensive today and massively powerful tomorrow. Of course they do. The right tools can help you:
- Smoother day-to-day operations
- Faster, easier growth
Here’s the problem:
The majority of startups choose tools based on monthly price. Don’t fall into that trap.
Subscription cost is just one part of the equation. Setup fees, data migration, and ERP training expenses can easily double what you thought you were spending.
The cheapest tools you can buy are the ones that can’t scale with your business.
Cash is king. If you’re running a startup, it’s especially important. Data from CB Insights shows 38% of failed startups reported running out of cash (or being unable to raise more) was a contributing factor for closing down.
So let’s look at how to choose your core business tools the smart way…
Here’s what’s inside:
- The Hidden Costs Most Founders Miss
- Why Scalability Matters From Day One
- 5x Ways To Balance Cost And Scalability
The Hidden Costs Most Founders Miss
One mistake you can make when evaluating business software is judging them solely on price.
However, the true expense of any tool is much greater. This is referred to as total cost of ownership which includes every expense associated with getting that tool functional for your team. This doesn’t just include the application itself.
Think about it:
If a tool costs $50/month but takes your team 3x weeks to learn…that tool isn’t cheap. It’s just expensive differently.
ERP Training Costs Are The Big One
So many startups get tripped up by ERP training costs. ERP stands for enterprise resource planning. It links up your finance, inventory, sales and operations into one system. It’s powerful… but useless if your team don’t know how to use it. Training courses, external consultants and lost productivity during the learning curve can become expensive, very quickly. Look at the licence fees and training budget side by side before you sign on the dotted line. Putting microsoft dynamics 365 business central pricing next to your expected staffing onboarding costs will give you a much clearer idea of what the system will cost to run in year one.
Pretty eye-opening, right?
Other hidden costs to watch for include:
- Moving your old data into the new system
- Paid add-ons and integrations
- Price increases when you add more users
And here’s the kicker…
Software costs are rising everywhere. A recent study found that average SaaS spend is now $4,830 per employee, up nearly 22% year-over-year. When you’re a small team on a shoestring budget, that growth can devour your runway.
Why Scalability Matters From Day One
Scalability just means your tools work with your business as it grows. Increased customers, increased orders, increased employees. Without fail.
Here’s why that’s important:
Switching tools down the road hurts. You have to migrate your data, retrain your team and repair all the integrations that were built with the old tool. That process can take months and end up costing you ten times more than the tool itself.
Imagine a fledgling online retailer who uses spreadsheets to manage inventory. That might work well when orders average 50x per week. But what happens when sales surge to 500 orders per week? Spreadsheet melt down. Errors are made and customers receive incorrect items. Staff spend hours correcting mistakes that could be spent driving business growth.
That’s the hidden cost of outgrowing your tools.
Right now, though, that doesn’t mean you should purchase the largest, most expensive system available. Jumping right in with huge, costly rigs is just as foolish. You want to get something that works for you now and can grow with you later.
5x Ways To Balance Cost And Scalability
Now onto the real stuff. Complete each step below prior to investing in any core business technology.
Start With Your Must-Have Features.
Create a small list of features your business actually needs. Not the “would be cool to have” features. The ones you need.
The average startup only uses a fraction of their features. Trim your list, and you won’t end up on a premium plan when a starter plan meets your needs.
Choose Tools With Flexible Pricing Tiers
Ideally, your startup tools will allow you to start small and scale up over time. Seek out tools that offer pricing tiers by user or by feature.
Quick tip: Be sure to know how much the next tier up is. It’s great how cheap a starter plan can be….. until you suddenly need to upgrade to a plan that’s 5x higher because you hit 10 employees.
Budget For Training Before You Buy
This is the one founders avoid. It’s also the one that causes the most pain later on.
All tools take time to learn. When implementing large systems such as an ERP or CRM package, ERP training expenses and onboard new users can quickly become a huge budget eater. Be sure to ask vendors ahead of time:
- Free training resources and tutorials
- The cost of paid onboarding support
- How long setup usually takes
If your team can learn a tool quickly, it’s probably worth more than a cheap tool that no one wants to use.
Make Sure Your Tools Talk To Each Other
Your accounting platform should integrate with your sales platform. Your inventory platform should integrate with your e-commerce store. Too often platforms don’t integrate with each other causing your employees to manually enter data. Data entry is slow and creates errors.
Before purchasing, review the list of native integrations. The better your tools integrate, the smoother scaling will be without having to hire additional employees to transport data.
Audit Your Tool Stack Every 6 Months
Software subscriptions are super easy to accumulate. One person signs up for tool X for a project. Someone else signs up for tool Y… now you’re paying for three platforms that do the same thing.
Make a biannual reminder to audit your tools. Unsubscribe from tools your team stopped using and consolidate tools with overlap. This easy practice will help manage costs and ensure every tool is earning its keep.
Putting It All Together
Selecting your core business tools is one of the most important decisions your startup will make. Choose wisely and your tools will empower you for years to come. Choose poorly and you’ll spend money, time and resources migrating to new systems in the future.
Don’t be fooled by monthly pricing. You need to look beyond the sticker price to account for setup fees, integration and ERP implementation training costs. Here’s a quick reminder:
- Focus on must-have features first
- Pick tools with flexible pricing tiers
- Budget for training before you buy
- Check that your tools connect to each other
- Audit your tool stack every 6 months
Balance your budget today with growth for tomorrow and your business tools will become an investment.. not an expense.
