If you’re not careful, subscription costs for the tools you need to run your startup can quickly eat away at the funds you need to hire employees and run your business.
You sign up for a CRM at $25 a month, a support tool at $30 a month, and an ATS at $40 a month, and it all feels like small amounts that are no big deal. But every new person you hire has a list of tools they need, and every new person gets added as a user to your existing tools. And before you know it, you’re shelling out multiple full-time salaries a month on business tools.
The better approach is to be as strategic with purchasing tools for your startup as you are with hiring, planning your roadmap, and setting your own prices. You don’t have to spend a fortune on tools when you’re just getting started; you just need a detailed plan of action on how you’ll minimize tool costs.
Use the five tips below to save money when buying business tools for your startup.
1. Look for tools with startup plans
Many software companies offer steep discounts to startups. Why? They know that you will grow, which will lead to increasing amounts of retention and expansion revenue for their businesses. And if you’re using their product from the beginning, you’ll be less likely to replace it down the line because of the switching costs of ripping out and setting up a new tool.
When shopping for tools for your startup, look for companies that offer startup plans:
- Use platforms like Secret or Startup Deals to find companies that offer startup plans.
- Review the pricing page of tools you’re interested in to see if a startup plan is mentioned. Keep in mind that sometimes these plans aren’t advertised, so you may need to do some digging or reach out to their team to ask about startup discounts to get one.
- If you have investors, check with them to see if they have partnerships with other tools that allow their portfolio companies to get discounts on software subscriptions.
Doing a little bit of digging before purchasing any tools for your startup can save you tens of thousands of dollars in the early days — money you can reinvest in building your tool and growing your business.
2. Negotiate with vendors
Buying software is similar to buying a car. Yes, there’s a sticker price, but that’s rarely — if ever — a fixed, non-negotiable cost. Most sales reps at software companies have a lot of flexibility in the pricing they can offer to close deals.
Follow these tips to have more successful negotiations:
- Plan a narrative before the sales call. If you can clearly articulate and illustrate how giving you a discount now will be beneficial to their business in the long run, you’ll have a better shot of getting a deal than if you just go in demanding a price break.
- Know when to walk away. Salespeople are also great negotiators, so you need to go into the call knowing exactly how much you’re willing to pay. If you can’t get them to agree to that price point, you have to be willing to walk away from the deal.
- Have a backup plan. Being willing to walk away only really works if you have a backup plan for when negotiations fail. Investigate multiple tools before you start the sales process so you have a shortlist of vendors whose tools you’d be happy to use.
- Get multiple quotes. One great way to negotiate is to show that another vendor offered you a better price. Companies are often willing to be more accommodating if it means stealing business from a competitor.
Remember that — as I mentioned in the last section — startups are often really profitable customers for other SaaS businesses, so they want your business. Use that to your advantage to negotiate a price that makes sense for you.
3. Make sure you’re buying the right tool
Vendors are often willing to give steep discounts if you’re willing to commit to a multi-year contract. This can be a good way to save money on software, assuming two things are true:
- You’re buying a tool that you know you’ll need long-term. You will always need a CRM. You may not always need that IP tracking tool you’re buying for an outbound experiment. Never sign a multi-year contract for something that’s experimental.
- You are certain the tool you’re buying is right for your business. You don’t want to get locked into a long-term contract only to discover that the tool you purchased isn’t really right for your needs. Spend lots of time testing tools, or use a demo automation service to test multiple tools side-by-side to find the right one before signing any deals.
If you’re confident that you’re buying a tool you’ll need long-term and that the tool you’ve chosen is the right one for your business, add subscription term length to your negotiation tactics to see if you can get to the price you can afford to pay by agreeing to pay for a longer period of time.
4. Time your purchase strategically
At the end of the month, end of the quarter, or end of the year, many sales reps are scrambling to meet their quotas, and many businesses are looking to add any additional revenue they can to hit their growth goals. This makes those time periods great for successful negotiations because vendors will be willing to go a little further to secure your revenue.
If possible, reach out to vendors at these times, and you may find that you have a lot more luck with your negotiations than you would if your timing was off.
5. Try negotiating a software trade
If you’re selling software that other software businesses need, you can always try to negotiate a trade — you give them your software for free for the first year, and in turn, they give you theirs for free for the same time period.
This is the most difficult of all of the ways to save on software because you’ll need to have a tool that vendors really want, you’ll have to get a lot of high-level decision markers involved in approving the deal, and you’ll need to make sure that the cost of supporting that customer on your side doesn’t outweigh what you would have paid for the tool.
But if you can make it work, it’s a great way to save on business tools and secure a new logo for your business.
Stop overpaying for business tools
Investing in business tools for your startup doesn’t have to be a financial burden. Effective purchasing strategies — from seeking discounted startup plans to negotiating for better deals — can save your business a significant amount of money.
Timing your purchases strategically, considering multi-year contracts for necessary tools, and even exploring software trades could also play a vital role in minimizing costs.
Remember, the key is to be as strategic with purchasing tools as you are in other aspects of your business. So follow these tips and stop overpaying for business tools for your startup.