Tag: Operating

Reducing Operating Costs for Your Startup Is Essential for Longevity

Cash flow management is already a challenge for startups, but COVID-19 is not making matters better. With unemployment rising and people spending less money on certain goods or services, startups are likely to suffer during this time. However, reducing operating expenses can help a startup stay afloat until operations are back to normal.

Reducing overall operating costs can certainly impact your bottom line, especially as the impact of COVID-19 is felt. Also, reevaluating the budget and allocating funds to different operations can keep essential parts of your business going. Keep reading to learn more about how to reduce the operating expenses for your startup while staying productive during COVID-19.

Review your budget with a new lens

When you created your budget for the year, the coronavirus was not likely to be on your mind. And, with updates and changes happening so fast over the last several months, 2020 can feel like one big game of catchup. Now that shelter-in-place ordinances are lifting and people are venturing back out into the world, it is a good time to reevaluate your operating budget.

Revenue projections are likely in need of an update, and your outlook for 2021 is different now than it was a few months ago. From lower sales numbers to higher churn rates, the priorities of your budget need to be evaluated. However, it is important to avoid simply slashing your budget. Wisely evaluating the numbers may indicate that some areas of your business are actually improving during this time.

Renegotiate contracts

The impact of COVID-19 is being felt across the country. If your business has shifted, it is likely that others connected to you have done the same. You may be able to renegotiate terms or contracts during this time to give yourself some breathing room. From reducing office costs to eliminating subscriptions, there are some measures you can take to prevent waste.

Office Space

If your company has shifted to remote work, you are likely paying for empty office space. Your landlord may be willing to negotiate your terms due to the unprecedented circumstances. In some cases, shelter-in-place orders may prohibit you from working in the office altogether. Review your contract to see if there are any provisions for a situation when the office space is not usable.

Subscriptions

Your startup likely has multiple active subscriptions. Whether you rely on monthly professional services, like IT support, or SaaS licenses to run your business, there might be some room for cuts. Try negotiating with your partners or vendors to reduce subscription costs. You may have licenses that you are no longer using or termination fees that can be renegotiated.

Deferred Payments

In cases where you cannot reduce operating costs in numbers, ask for deferred payments. Lengthening the payment cycle can improve your cash flow temporarily and get you through a rough patch.

Eliminate nonessential tools

When you reevaluate your budget, you may find that it is skewed in one area. Go line by line to review the various tools and services used by your business, determine which are essential and which items can be cut. Reviewing financial statements is a great way to visualize where your budget is going, instead of assuming. You may have duplicate tools, tools that are no longer in use, or items that can be replaced with a less expensive alternative.

Cut Unnecessary Licenses

Reviewing all the tools and services used by your team could also highlight which services have too many licenses. Are all licenses being used, or can some be eliminated? Also, you may be paying for additional functions that you could go without, at least for the time being. Dropping your subscription tier or reducing the number of licenses could help lower operating costs.

Cut Out Paper

While it may seem small, going paperless can help your bottom line. Businesses spend quite a bit on paper, printers, and ink every year. If your team is working remote, there is even less reason to use paper. When you return to the office, you can continue the habits formed during quarantine to reduce the overall paper usage of your business.

Stay flexible

Things are likely to continue changing as we learn more about COVID-19 and its overall impact. There may be unlikely opportunities to reduce your operating expenses over time. The unpredictability of COVID-19 combined with the changing nature of startups makes it important to stay on your toes. You may find yourself considering new or innovative ideas that you would not have previously thought of.

Evaluate More Frequently

Periodically evaluating your budget and outlook can help you stay more agile and flexible. As your startup changes and evolves, your operating costs need to follow. Set up more frequent evaluations to stay on top of your operating costs and adjust as needed.

Pause large investments or projects

For many startups, cash flow is limited. COVID-19 is putting major purchases and projects on hold until businesses can stabilize. Instead of considering these pauses as losses, pay attention to the money you are saving and the cash you are making available.

New Equipment

Were you planning to upgrade everyone’s laptops this year or purchase a new phone system? COVID-19 may not be the right time to make major investments like purchasing new equipment. Instead, stick to only buying what is necessary. Look for refurbished or second-hand items when possible to save on operating costs.

Marketing Initiatives

Unless your marketing initiatives are seeing a positive ROI, it may be time to pause big projects. Instead of rolling out previously scheduled campaigns, reevaluate your marketing calendar to determine what will move the needle for your business. If your customers are pushing off on buying decisions, now might not be the time to invest in sales and marketing.

Utilize Free Trial Periods

If you absolutely must purchase a new service or equipment, take advantage of free trial periods. Ensure the vendor is the right partner for you by testing their product or service ahead of time. In some cases, vendors will negotiate on the trial period if you are serious about buying.

Reduce payroll

Finally, reducing payroll can help lower operating costs. Many startups see this as a last resort because it greatly impacts your operational capacity as well as the individual lives of employees. However, in some cases, it is a necessary measure.

Implement a Hiring Freeze

You can make steps towards reducing operational costs by implementing a hiring freeze. Avoid filling positions unless necessary. Your team may be stretched thin, but you can avoid eliminating current positions this way.

Contract Out

Instead of hiring for new positions, contract out when possible. For example, you may need financial guidance during COVID-19. You can contract with a freelance CFO to work part-time at a lower cost than hiring an executive-level position. Firms like K-38 Consulting provide services from top-notch financial advisors, and you only pay for services when you need them.

12 eCommerce Legal Issues to Consider in Operating an Online Business

The following article provides a high-level summary of some key eCommerce law issues online business operators face in running a website or other eCommerce business. Conducting business online or maintaining a website may subject companies and individuals to unforeseen legal liabilities. The following is a brief survey of 12 key eCommerce law issues to consider:

1. Internet Business & eCommerce

A good starting point is analyzing a company’s online presence and auditing their procedures to determine how to grow their brand and online influence. As part of this, the company’s agreements and websites should comply with the myriad of laws and regulations affecting websites and online businesses, such as COPPA.

2. Domain Name Acquisition

Domains are often the key to an online business, but can present a number of problems. Domain name issues include securing a domain name initially, as well as protecting domain names from adverse parties that attempt to trade off the goodwill associated with the company’s brand. Sometimes, the company needs defense, retrieval, and protection of domain names on the Internet.

3. Digital Millennium Copyright Act (“DMCA”) Compliance

Companies operating websites, particularly where third-party content may be uploaded directly, should consider adopting agreements and procedures to shield themselves against claims of liability and copyright infringement. This procedure is sometimes referred to as a “copyright policy” or “DMCA takedown” procedure. Compliance with the DMCA can provide the online operator with a safe harbor from liability.

4. Online Privacy

Online privacy continues to become a bigger issue. With the spread of mobile devices, tablets, and apps, privacy issues are becoming more complex. Companies should consider composing or updating their privacy policies as well as adopting internal security protocols aimed at protecting the online privacy of customers and website users.

5. Social Media Law

While a powerful vehicle to build brand strength and interact with customers, social media can create a number of legal issues for online businesses. A social media policy provided to employees as well as guidelines can be effective steps to reduce risk. A few key areas to consider are employment related use of social media, confidentiality, sponsorship, and branding guidelines.

6. Privacy Policies

Privacy policies should not be copied from online templates or rival companies. They should be drafted comprehensively to address unique issues of a specific online business and to accommodate future growth. Whether a company looks to collect analytics or more personalized information, the company should focus on its specific business needs and risk factors. Privacy policies should be updated as a business evolves.

7. Terms of Use Agreements

Terms of Use (TOU) agreements can limit liability for companies that maintain an Internet presence. These agreements should be optimized to address a company’s specific business and should not be simply cut and pasted from the Internet. What works for one company may not work for another company.

8. eCommerce Agreements

eCommerce agreements come in many forms such as licensing, advertising agreements, and payment processor agreements. eCommerce agreements should be drafted to address the primary legal risks involved in a particular eCommerce contract or business transaction.

9. Online Sweepstakes & Games

Online sweepstakes, contests, and games create a number of legal pitfalls. Depending on the sweepstake, contest, or game, compliance with the laws of all 50 states as well as the federal government may be required. Registration in specific states may also be required. Online businesses may benefit from guidance as to whether a particular new initiative is considered a sweepstake, contest, or game.

10. Domain Theft

Recovering hijacked domains can often be difficult and time-consuming. Typically, avoiding domain theft in the first place is much easier than attempting to recover a stolen domain. While difficult, it is possible to recover a hijacked domain.

11. Website Agreements

Website agreements can be customized to limit legal liability and reduce risks of disputes by analyzing an online business’s intellectual property portfolio, business processes, and brand objectives. Website agreements can be used for mobile applications in addition to websites.

12. Impersonation and Username Squatting

Impersonation and username squatting can occur when a third party registers a social media account using someone else’s identity. This can result in harmful posts and information being published in social media. Username squatting can also prevent a trademark or brand owner from controlling their trademark. Typically, registering usernames in advance is the best strategy to avoid impersonation or username squatting.

While the above identifies a number of eCommerce and internet law issues affecting website and online business operators, an in-depth analysis may be required. For more information, you may want to contact an eCommerce attorney.

Disclaimer – As with any discussion of legal topics, this article is intended to be educational only, and is not a substitute for legal advice, nor does it provide legal advice or form an attorney-client relationship with the reader. Please seek legal counsel before making any decisions. Also, please note that this article will likely not be updated, so the law and circumstances may have changed by the time you have read this article.

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