Managing SaaS spending in a startup finance team can be challenging. They are often required to justify every SaaS dollar spent on tools they don’t directly use. To address this issue, Hudled has developed a framework for evaluating how to reduce SaaS spending. We've categorized it into three areas:
- Company critical
- Important for departments
- Effective for employees
By understanding these categories, finance teams in startups can optimize their SaaS spending and reduce unnecessary costs.
SaaS management tips for company critical tools (50-70% of spend)
Company critical tools drive a significant portion of the company's total SaaS spend. Examples include hosting services, such as AWS and Azure, and CRM platforms, such as Salesforce and Hubspot. Consider the following when thinking about reducing spending in this area:
- Optimizing cost is high effort with a high ROI
- Finance teams should review these costs quarterly
- Commit to volume discounts, as these can provide significant savings over time.
- Try to renegotiate terms and price with vendors
- Switching this tool off isn’t an option
SaaS management tips for important for department tools (30-40% of spend)
Important for department tools account for a moderate portion of cost. They typically are the largest costs that sit within each department. Examples of these tools are Intercom for customer success and Klavyio for marketing. Commonly, these tools have overlapping features with some of your company's critical tools. Consider the following when thinking about reducing spending in this area:
- Optimizing cost is high effort with a low-moderate ROI
- Finance teams should review these costs quarterly or every six months.
- Identify tools that have overlapping features.
- Review licenses, marketing contacts, or usage-based tools for savings. These are the most common areas for bloat.
- Understand that there are typically high labor costs to migrate to consolidate. This could yield a negative ROI and outweigh the benefits.
SaaS Management tips for effective for employee tools (5-10% of spend)
Effective for employee tools are designed to enhance productivity and represent a small portion of the total budget. These tools represent a longtail of spending, and adoption can quickly spiral out of control if not handled properly. Consider the following when thinking about reducing spending in this area:
- Optimizing cost is high effort with low ROI
- Finance teams should review these costs annually
- Departments should own their own evaluation, spending and budgets
- Finance should set spending limits to cap cost creep.
SaaS optimization for startups
To balance cost reduction and business performance, startups must prioritize actions with the highest potential ROI. It’s the role of finance that they manage any change management or consolidation projects pragmatically, with cost being front and centre of any decision.
Get access to a free SaaS management tool
SaaS management is typically overlooked for startups because it's difficult to understand where the saving opportunities exist. Luckily, Hudled can do this for you without the overhead. Get started for free with Hudled and request a SaaS audit.