The CEO of a successful AI startup, Birju Shah, managed to drastically reduce his software as a service expenses by half amidst challenging financial circumstances in fall 2022. Originally facing a 49-month financial runway, Shah found himself with only 25 months due to a cautious investment climate. Determined to take swift action, he began reevaluating the licensing costs of various SaaS platforms that his company, Loam, was utilizing.

With monthly expenditures of around $70,000 on SaaS subscriptions, Shah recognized the need to make significant changes to sustain his business. By identifying unnecessary licenses and negotiating more favorable terms with providers, he successfully slashed his SaaS expenses to $35,000 per month, gaining an additional six months of financial stability for Loam.

Shah, who also imparts his knowledge at Northwestern University’s Kellogg School of Management, continues to utilize approximately thirty different SaaS products essential for his operations. Through a meticulous audit process, he evaluates the usage and importance of each tool, enabling him to prioritize and optimize his expenditures effectively.

In instances where cutting a tool entirely is not feasible, Shah explores alternatives such as developing cost-effective custom solutions or seeking cheaper substitutes. By leveraging his data assets as a bargaining chip with SaaS providers, Shah has successfully renegotiated contracts and secured discounts on platforms like AWS, HubSpot, Google Cloud, and Salesforce.

In addition to strategic negotiations, Shah advocates for collaboration among small businesses facing similar SaaS challenges. By forming cooperative alliances, companies can collectively negotiate better terms with service providers, benefiting from collective bargaining power and shared resources.