Startups overspend on SaaS by 30% on average. Learn to cut costs, spot waste, and future-proof your stack with smart audits and OSS tools.
Table of Contents
SaaS (Software-as-a-Service) tools have become the backbone of early-stage startups, promising agility, scalability, and reduced operational overhead. But here’s the catch—most young companies dramatically underestimate their true SaaS costs. According to Custify’s 2024 SaaS report, startups spend an average of $343,000 annually on SaaS tools, with over 30% of that spend wasted on unused or redundant subscriptions.
In this guide, we’ll uncover the hidden costs of SaaS for startups, why overspending happens, and how to take back control of your software budget without sacrificing productivity.
Startups love SaaS for good reasons—quick setup, easy collaboration, and minimal IT requirements. However, this convenience often leads to “tool creep” (Tipalti on SaaS spend management):
Result? Dozens of tools get added to the tech stack, often with overlapping functionalities and underutilized features.
While subscription fees are the most obvious expense, the true cost of SaaS goes beyond the monthly invoice:
Pro Tip: Conduct a quarterly SaaS audit to uncover unused licenses and duplicate subscriptions. Use our Guide to SaaS Audits to get started.
Early-stage companies are hit hardest by SaaS overspending for three reasons:
According to a Gartner report on SaaS spending (source), SaaS expenses can account for 15–20% of a startup’s operating budget by Series A.
Theory is one thing, but the reality of SaaS overspending is even more striking when you look at real startups. Take BrightScale, a B2B SaaS startup that launched with only six software tools and a monthly spend of $1,200. Within 18 months, as their team expanded from 10 to 60 employees, their SaaS stack swelled to 30+ tools, costing more than $15,000 per month. A deeper audit revealed that 40% of the tools were rarely used, and a third of their bill went to inactive user licenses.
Another example: Growlytics, an e-commerce startup, found their marketing, sales, and support teams were all running separate email marketing platforms. Between Mailchimp, Klaviyo, and HubSpot, they were spending $100K annually, with much of it spent on duplicate features. After switching to a managed open-source alternative, they slashed costs by $45K/year and improved cross-team reporting.
These are not isolated cases. BetterCloud’s SaaS usage report found that the average company underestimates SaaS costs by 30%, with unused licenses and “tool sprawl” being the primary culprits.
One of the biggest mistakes early-stage startups make is failing to forecast future SaaS costs. What feels affordable with five employees can quickly spiral out of control as the company scales. Here’s how to build a reliable forecast:
Don’t just consider your monthly subscription fee. TCO also includes:
Ask: “What happens when our headcount or user base triples?” Use historical growth data to project future usage and apply pricing tier jumps. Capterra’s SaaS pricing guide shows that pricing can jump 3–5x between tiers.
Factor in employee training, retraining, and downtime when switching systems. Don’t forget vendor lock-in, where exporting your data might require additional fees and time.
Create a simple spreadsheet with:
This exercise offers a realistic view of your long-term SaaS expenses, helping you decide if your current tools will remain sustainable.
While SaaS overspending is common, it’s not inevitable. Here are practices that can help:
A centralized approval process ensures teams don’t buy overlapping tools. Many startups reduce their SaaS spend by 20–30% simply by eliminating duplicates.
Review your stack quarterly, not yearly. Identify unused licenses, redundant apps, and unnecessary add-ons. Use our SaaS Audit Guide for a step-by-step process.
Choose tools that can grow with you without punishing pricing jumps. Managed open-source solutions like Ektosa offer enterprise-grade features without the scaling penalties.
Cancel tools not used in the last 60–90 days. Redirect those funds toward growth initiatives.
Most startups use less than 30% of the features they pay for. Providing brief, targeted training sessions can improve adoption and ROI.
Compare your SaaS spend against industry norms. Many companies overpay simply because they’ve never negotiated or updated their contracts.
Here are clear signs your startup might be overspending:
1. Consolidate Your Tool Stack
Identify apps with overlapping features. Many all-in-one platforms can replace 2–3 niche tools. Check our list of open-source SaaS alternatives.
2. Negotiate Better Deals
Most SaaS vendors are open to discounts, especially if you pay annually or commit to a longer term. CloudEagle’s savings case studies show that companies can save up to 30%.
3. Explore Managed Open-Source Alternatives
Platforms like Ektosa’s Managed Open-Source Services provide affordable, managed open-source solutions that can cut costs by 50–90% while maintaining the ease of SaaS.
SaaS isn’t going away—but overspending doesn’t have to be part of your growth story.
By auditing your subscriptions, consolidating tools, and exploring cost-effective managed open-source alternatives, your startup can reclaim thousands of dollars annually—money better spent on innovation and scaling.
Head of Strategy at Ektosa | Accenture Strategy & Consulting
