If I asked you right now how much your business spends on software every month, you would probably guess a number. Whatever that number is, the real one is almost certainly higher, usually by 40 to 60 percent.
Software spend has a way of disappearing into expense reports, personal cards, and "I''ll cancel that next month" trials. Here is a quick weekend audit that will tell you the real number.
Why you cannot guess
Three reasons your guess is wrong:
- Charges are spread across multiple cards, multiple people, and multiple billing cycles.
- Annual subscriptions hit once and then feel free for 11 months.
- Per-seat tools quietly grew because you added people.
The number you remember is from when you signed up. The number on your statement today is different.
The 2-hour audit
Hour 1: List everything
Open your business bank account and every business credit card. Pull the last 12 months of statements.
Go line by line. Any charge that is recurring, monthly, quarterly, annually, goes on a spreadsheet. Columns:
- Tool name.
- Billing frequency.
- Per-charge amount.
- Annualized amount (per-charge times charges per year).
- Who uses it.
- What it does for you.
Do not skip the small ones. A $9 per month tool is $108 a year. Ten of those is over $1,000 a year.
Also check:
- Personal cards used for business tools.
- Apple, Google, Adobe, and Microsoft accounts (often contain hidden subscriptions).
- Domain registrars (you usually have more domains than you think).
- Stripe and PayPal monthly summaries (some tools bill through these).
Hour 2: Sort and decide
Sort the spreadsheet by annualized amount, biggest at the top.
Now go down the list and mark each row with one of four labels:
- Keep: We use this every week and it is worth the money.
- Downgrade: We can drop to a cheaper plan.
- Replace: This is doing one job that a simpler tool could do for less.
- Cancel: Nobody uses this or we forgot it existed.
Cancel everything in the Cancel pile this week. Downgrade everything in the Downgrade pile by the end of the month. The savings are usually 15 to 30 percent of your total, immediately.
The big spenders deserve a real look
The top 3 to 5 most expensive tools on your list are where the real money is.
For each one, ask:
- Are we using more than half its features?
- Is the cost scaling with our team (per-seat pricing)?
- Is the price going up every renewal?
- Is there a simpler way to get the same outcome?
If two or more of those answers are bad, that tool is a candidate for replacement.
What you usually find
After auditing a few hundred small businesses, here is the pattern:
- 10 to 15 percent of the bill is for things nobody is using. Pure waste.
- 20 to 30 percent is for tier or feature upgrades you do not actually need.
- 30 to 50 percent is locked into 2 or 3 "big" tools (usually a CRM, a project tool, and a support or marketing platform).
The first 30 to 45 percent you can cut this month. The remaining 30 to 50 percent is where a custom build, owned by you, often makes more sense than continuing to rent.
What to do with the number
Once you know the real annual number, plug it into our calculator. It will show you exactly how much of that spend could be replaced by a one-time custom build, and how fast it would pay for itself.
Most owners are surprised by the gap. You will probably be one of them.
