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What are some hacks for reducing your burn rate if you are a startup?

Vanessa Kruze, CPA, is a leading expert in startup taxes and tax compliance. Her team at Kruze Consulting has filed thousands of tax returns for companies that have raised billions in VC funding, and her work has been diligenced by leading VCs, attorneys, and M&A teams at the largest technology companies.
Vanessa Kruze, a highly-experienced CPA, brings valuable tax expertise to startups, drawing from her rich background at Deloitte Tax and as a financial controller for a $20 million startup. As the leader of Kruze Consulting, recognized multiple times in the Inc 5000 list, she specializes in navigating the complex tax landscape for startups. Her firm is known for delivering precise and strategic tax solutions, delivering tax credits utilizing advanced tools to ensure compliance and optimize tax benefits for startups throughout the United States.

Table of contents

Every startup spends >80% of their money on 3 things: Payroll, Rent, and Contractors. If you can save money there, you’ll hack your burn rate. Anything other than these three things is a waste of your time, eg saving $250 month by moving from Anna’s Janitorial to Martha’s Janitorial. Please don’t analyze anything else if you’re trying to save money. To review:

  1. Payroll: people are expensive. Hire the very best people that you can and pay them well. Always take quality of people over quantity. As David Barrett trumpets in this article, more people does not equal more output, it means more overhead.
  2. Rent: rent is expensive, so consider having a remote office or headquartering in a city other than San Francisco or New York. Austin and Portland have a blazing hot startup scene for this very reason.
  3. Contractors: contractors are expensive… but less so than employees. You don’t have to manage additional rent/desk space, equipment, or training. The trouble is, they might not be loyal or responsive.

Little known startup burn hack: A recent new tax law allows many unprofitable startups to reduce their burn (by slashing their payroll taxes!) - up to $250K per year! Use this calculator to estimate how much you could cut your burn with an R&D tax credit study. That’s a legit hack to cut your startup’s burn!

Your burn rate

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