Why Founders Underestimate SaaS Spend By 30 Percent Or More

Have you ever looked at your monthly credit card statement and wondered exactly what all those software charges are for? We have been there. It starts small with a few subscriptions here and there, but before you know it, that "Software" line item has ballooned into one of your biggest expenses.

In our experience running small teams, underestimated SaaS spend is a silent budget killer. In fact, unchecked software subscriptions often cost companies 30 percent or more than they planned. This isn't just about paying for tools you use; it is about paying for the ones you forgot about.

The good news is that getting it under control is easier than you think. In this guide, we will walk you through exactly how to find those hidden costs and share the simple steps we use to keep our software spending predictable.

Let's get those expenses back in line.

Key Takeaways

• Waste is higher than you think: Recent 2025 data from Zylo reveals that organizations waste an average of 53% of their SaaS licenses, meaning half of what you pay for might not even be used.
• SaaS inflation is real: Prices for software tools rose by approximately 11.4% in early 2025, significantly outpacing general market inflation and quietly eating into your margins.
• Shadow IT is a major blind spot: About 33% of all apps in a company are purchased without IT knowing, often leading to security risks and duplicate spending.
• Small teams use more apps than they realize: While very small businesses use around 16-20 apps, companies with just 50 employees often juggle over 24 distinct SaaS applications, creating management chaos.
• Consolidation saves cash: Merging overlapping tools (like having three different project management apps) can save thousands instantly.
• Automation is your friend: Tools like Zluri and RenewGuard can catch renewals before they happen, potentially saving companies from costly auto-renewals.

The Hidden Problem: Underestimated SaaS Spend

We often think we have a handle on our expenses until we actually dig into the numbers. The reality is that most founders misjudge their true SaaS spend because the costs are spread across so many different credit cards and departments.

The prevalence of underestimating SaaS costs

Most of us in the small business world miss the true scale of our Software as a Service costs. It is common to underestimate the number of apps we use by nearly half. You might think you have 10 subscriptions, but you likely have 20.

Recent data from 2025 paints a stark picture. SaaS prices have jumped by over 11%, meaning the stack you paid for last year is now significantly more expensive for the exact same features. On top of that, Flexera’s report from 2022 highlighted that roughly one-third of SaaS spending is wasted on unused tools, and this trend has only accelerated.

Shadow IT plays a huge role here. This happens when team members sign up for tools like Canva, ChatGPT Plus, or Dropbox using their own corporate cards without telling anyone. Research from Josys in 2024 found that the average company has hundreds of "unknown" cloud services connected to their network.

For us, this means budget forecasts are often wrong from day one. We allocate resources based on what we think we spend, not the reality of those recurring $29/month charges that fly under the radar.

The impact on budgets and operations

For agencies and businesses with fewer than 40 people, these costs add up fast. Without careful analysis, software can quickly become your third-largest expense after payroll and rent.

We have seen estimates suggesting that small businesses spend over $4,800 per employee on SaaS annually. If you have a team of 10, that is nearly $50,000 a year just on subscriptions. When you consider that 53% of those licenses might be sitting idle, you are looking at $25,000 of pure waste.

It also hurts efficiency. When your team uses three different project management tools because there is no central oversight, information gets siloed. One finance manager we spoke with put it perfectly:

When 72% of subscriptions are purchased without a formal review, you end up with "zombie" accounts. These are seats for employees who left the company months ago but are still being billed because no one cancelled their Salesforce or Slack access. Staying ahead requires us to treat software buying as a strategic decision, not just an expense report line item.

Causes of Underestimated SaaS Spend

So why does this happen? In our experience, it is rarely due to negligence. It is usually a mix of easy sign-up processes, lack of visibility, and the "set it and forget it" nature of subscriptions.

Shadow IT and unauthorized tools

Employees want to move fast. If they need a tool to get a job done, they will often buy it themselves rather than waiting for approval. This is Shadow IT, and it accounts for about 33% of all applications in a typical company.

In our own teams, we found that Shadow IT isn't malicious. It is often just someone needing a better PDF editor or a specific design tool. However, these unauthorized purchases increase compliance risks significantly. If a team member uploads client data to an unvetted AI tool, you could be facing a data breach without even knowing the tool existed.

Recent statistics show that nearly half of cyberattacks can be traced back to these unmanaged assets. For a small business, the cost of a breach—averaging over $4 million globally—is a risk we simply cannot afford to take.

Lack of visibility into SaaS usage

You cannot manage what you cannot see. Many small organizations operate without a central "master list" of software. Instead, subscriptions are hidden in expense reports under vague names like "AMZN Digital" or "PayPal *Vendor".

Industry data suggests that IT departments (or the person acting as IT) manage only about 26% of total SaaS spend. The rest is scattered across marketing, sales, and HR budgets. This scattered approach keeps us in the dark.

Without a dedicated dashboard or at least a rigorous spreadsheet, we are forced to rely on guesswork. We often don't know if a subscription is for one person or the whole company, or if it auto-renews next week or next year.

Unused and underutilized licenses

This is the most frustrating cause of waste. You buy a 10-seat pack for a tool because it is cheaper per user, but you only ever hire 7 people. Those 3 extra seats sit empty every single month.

According to 2025 data from Zylo, 53% of SaaS licenses are not used. That is more than half of what companies pay for. We have seen cases where a company was paying for 50 seats of a premium LinkedIn Sales Navigator plan, but only 12 people had logged in during the last 90 days.

Gartner reports consistently highlight this waste. It is not just about empty seats; it is also about paying for the "Pro" tier when the "Basic" tier would do. Regular audits are the only way to catch this, but busy founders rarely have the time to check login logs.

Redundant applications across departments

Do you really need Trello, Asana, and Monday.com? Often, different departments pick their favorite tools without talking to each other. Marketing loves Trello for its boards, while Developers swear by Jira, and the Ops team just bought Monday.com.

Here is a quick look at how these costs overlap for a team of 10 users:

If your company uses all three, you are spending over $3,000 a year just on project management. Consolidating to a single platform could save you $2,000 instantly. We have found that standardizing on one tool not only saves money but also helps teams collaborate better.

Poor contract and renewal management

We have all been caught by the "auto-renewal" trap. You sign up for a free trial that converts to a paid plan, or an annual contract rolls over because you missed the cancellation window by one day.

A classic "gotcha" comes from major vendors like Adobe. If you sign up for their "Annual plan, paid monthly" option and try to cancel after 14 days, you are often hit with a cancellation fee equal to 50% of your remaining contract. That can be hundreds of dollars you didn't expect to pay.

On average, organizations handle hundreds of renewals a year. Missing just one notification can lock you into another 12 months of a tool you intended to drop. Without automated alerts, we are at the mercy of the vendor's terms.

Consequences of Underestimated SaaS Spend

Ignoring these costs does more than just hurt your bank account. It introduces risks and inefficiencies that can slow down your entire business growth.

Financial waste and bloated budgets

Every dollar wasted on unused software is a dollar you cannot spend on marketing, hiring, or product development. Recent reports show that nearly 31% of desktop software spending goes unused. For a bootstrapped agency, that is profit margin walking out the door.

In our own experience, we found that "bloat" happens slowly. A $50 subscription here and a $20 add-on there does not seem like much, but across a year, it compounds. Relying on outdated management methods means we continue to pay for tools that no longer serve our business goals.

Tightening this process is one of the fastest ways to improve cash flow without having to sell more product.

Increased security and compliance risks

When you don't know what software your team is using, you cannot secure it. Gartner predicts that companies lacking structured SaaS oversight will face significantly more cyber incidents.

We have learned firsthand that offboarding is a major vulnerability. If an employee leaves and you forget to revoke their access to a shadow IT app like Dropbox, they effectively still have the keys to your company's data. This isn't just a security risk; it is a compliance nightmare if you handle sensitive customer information.

Promptly tracking access helps us prevent these "orphaned" accounts. It ensures that only current, authorized employees can access our systems.

Inefficiency in IT support and operations

Underestimating SaaS spend by 30 percent or more usually means you have a messy tech stack. Our experience shows that when teams use too many different tools, they spend more time shuffling data between them than actually working.

If your support team uses Zendesk but your sales team lives in HubSpot and they don't integrate well, you are paying for manual data entry. Misaligned tools drain resources and frustrate employees who just want things to work.

By implementing better workflows and choosing tools that talk to each other, we can drive operational efficiency. It is about quality over quantity.

Missed opportunities for cost optimization

Many small businesses miss out on savings simply because they don't ask. Vendors often offer volume discounts, multi-year deals, or bundled pricing that you only get if you negotiate.

Companies that rationalize their stack—meaning they cut the dead weight and negotiate the rest—can often save over 30 percent. One Fortune 500 firm saved nearly $1 million just by cutting duplicate apps, but even small agencies can save thousands.

We see improved efficiency when we use spend analysis to spot these opportunities. Instead of paying list price for every single license, we can pool our needs and get a better deal.

How to Address SaaS Overspending

You don't need an expensive consultant to fix this. We can control SaaS overspending with a few smart, practical strategies that you can start today.

Conducting a comprehensive SaaS audit

The first step is to find out what you actually have. Start by reviewing your bank and credit card statements for the last 12 months. Look for any recurring charge, no matter how small.

Pro Tip: If you use Google Workspace or Microsoft 365, check the "Sign in with Google/Microsoft" security logs. This will show you every third-party app your employees have logged into using their corporate credentials. It is often a goldmine for discovering Shadow IT.

Our experience shows that mapping out this "SaaS footprint" is an eye-opener. You will likely find overlapping tools and forgotten subscriptions immediately. This simple audit is the foundation for significant cost savings.

Implementing centralized SaaS management processes

You need a system to stop the bleeding. Centralizing your SaaS management does not mean you have to be a bottleneck; it just means you need oversight.

For small teams, this can be as simple as a rule: "All software purchases over $0 must be approved via this Slack channel." This gives you a chance to say, "Hey, we already have a tool for that," before the credit card is charged.

We can use platforms like Zluri to track spending in real time, but even a shared spreadsheet is better than nothing. The goal is to ensure that every new subscription is intentional and categorized correctly.

Tracking usage and optimizing licenses

Don't just renew blindly. Before a contract is up, look at the usage data. Most admin panels (like in Zoom or Salesforce) will tell you exactly when a user last logged in.

We review these analytics quarterly. If someone hasn't logged in for 90 days, we downgrade their license or remove it entirely. This practice alone decreased our costs by nearly 30 percent in just six months.

Industry findings confirm that right-sizing your licenses is the lowest-hanging fruit for cost optimization. You should only pay for value, not for shelfware.

Consolidating redundant tools

Once you have your list, look for the duplicates. If you have three video conferencing tools, pick one and cancel the others. We migrated our entire agency to a single project management platform and instantly saved money while improving collaboration.

This process, called application rationalization, can save anywhere from thousands to millions depending on company size. It also simplifies onboarding for new hires—they only have to learn one tool instead of three.

Automating renewal alerts and tracking

Never let a renewal surprise you again. We recommend using automated renewal alerts to stay ahead of the game. RenewGuard sends reminders 30 and 7 days before a contract renews.

If you are not ready for a dedicated tool, put every renewal date on a shared company calendar with a reminder set for 30 days prior. This gives you time to cancel or negotiate before you are locked in for another year.

Assigning an "owner" to each tool is also crucial. If the Marketing Director owns the HubSpot contract, they should be the one responsible for verifying that we still need all those seats.

The Role of SaaS Management Platforms

If you are growing fast, spreadsheets might not cut it anymore. SaaS management platforms (SMPs) can give us the real-time data we need to protect our profit margins.

Real-time visibility into SaaS usage and costs

Tools like Zylo or Zluri connect directly to your finance and SSO systems to discover apps automatically. They find the new spending as it happens, not months later.

This level of transparency means you have a single dashboard showing every dollar spent on software. We can spot trends, like a sudden spike in AI tool usage, and address them immediately. It turns a chaotic mess of expenses into a clear, manageable picture.

Automation for license optimization and renewals

The real power of these platforms is automation. They can automatically email users who haven't logged in recently, asking if they still need their license. If the user says no (or doesn't reply), the system can de-provision them automatically.

These workflows save IT teams hours of manual work and ensure that your license count is always optimized. By automating the boring stuff, we reduce financial waste and let our teams focus on work that actually grows the business.

Conclusion

Smart SaaS budgeting brings major gains for small teams, yet the data shows how easily costs spiral out of control. Many founders overlook the impact of shadow IT, unused licenses, and poor contract management until it is too late.

By actively tracking software use and reviewing subscriptions, we can reclaim lost capital and strengthen profit margins. It is time to stop underestimating the cost of our tools and start making them work for our bottom line.

References

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