Strategies for Managing Budget Cuts and Maintaining Economic Stability

Last year this time, I faced what seemed like an impossible task: slashing our $100K monthly burn and steering us towards profitability in just three months. As we step into 2024, I know many founders are grappling with similar challenges. Let me tell you, it's painful, but yes, it's possible! Here’s how I turned things around in 10 steps: 1. Undertake House Cleaning Cut unnecessary software licenses and renegotiated terms with vendors. Surprisingly, a few were open to it, leading to significant savings. Get on the phone, it works. 2. Reassess the Business Model It was crucial to identify dependencies, and what drove costs and revenues. The goal was to either cut costs while maintaining revenue or grow revenue without increasing costs. 3. Get Real with Revenue Projections Times of doubling or tripling revenues will have to wait. We switched to conservative, achievable targets, turning any upside into 'Good News'. 4. Sharpen Your Revenue & Cash Focus We honed in on our most profitable revenue streams with favorable cash flow. Remember, paper profit doesn't equal cash in hand. 5. Analyze Every Expense for Profit Generation This meant assessing each expense against our revised revenue plan iteratively, uncovering dependencies, and resulting in multiple scenarios with different risk / growth profiles. 6. Align with Your Board Presented different options to our board, ranging from moderate to deep cuts, each with varying risks to our business’s future prospects. 7. Get Management Team Buy-In This step was critical, especially for those most affected by the cuts. Collaborative planning for communication and rollout was key. 8. Executing Cuts The most challenging part. We scheduled back-to-back 1-on-1 calls with those let go and an all-hands meeting shortly after to ensure clarity and respect for everyone involved. The best advice I got: "Cut deep and cut once". 9. Welcome to the New Company Be transparent, acknowledge the changes and the reasons behind them, and share that there will be no further cuts. It is vital to re-energize the team, realign focus towards profitability, and build a shared vision of the future. 10. Embrace the ‘Good News’ The result was astonishing – a leaner, more focused team outperforming revenue projections by over 30%. This journey was as much about transforming the company as it was about evolving my leadership style. The new path demanded frugality, creativity, and a heightened focus on profitability. 🔥 Founders, if you are wrestling with this now, remember you are not alone. Reach out! Happy to be a sounding board. Here’s to making the impossible possible! #Startups #Profitability #Leadership #Startupfunding

If you're in-house and need to cut budget, trying harder isn't a plan. In these situations, GCs and ops folks' first instinct is to avoid OC phone calls and just cut things if contracts can be gotten out of. Not saying you may not make the budget in year 1, you might. But you (1) can't sustain just pushing things off and avoiding issues for the next couple of years, and (2) you and your people are burning the candle on both ends. Better strategy: (1) go grab a resource from somewhere about best ways to minimize spend. (Go to Practical Law, google it, call a trusted confidante, I don't care but go do a little research. You're a legal person, so you are a stellar researcher!) (2) Once you have some ideas, take some time to think about how you can implement some of those ideas internally, and if you have other legal minds with you, brainstorm together. (3) WRITE THE PLAN DOWN along with your hoped for/expected savings for each part of the plan you're going to implement. Example (a) We can start doing X internally, (b) here is how and who, and (c) this can save us Y.] Btw, I'd be happy to help you with that strategy piece if you need to talk. That said, I don't even need to talk to tell you that most solutions will boil down into 3 pots. (The magic is in how you make the soup.) Pot 1: Technology - Using tech to simplify, automate, and cut costs. Pot 2: Better utilizing internal resources and time - Can you reorganize your people to keep more high $$ projects in-house? Or maybe it is low-value stuff that could actually be done internally quickly instead of sending outside. Pot 3: Better rates on OC projects - First, yes, you should negotiate those large annual rate increases from your OC firms. That said, I'm not really talking about that. I'm talking about taking some time to make sure you're paying the right money for the work. If you're in bet-the-farm litigation, okay use the AmLaw firm and pay that rate. However, when you're doing the more standard stuff that still needs to go outside, take the time (research or developing the network) to figure out if there is a boutique shop that can do it well and for less or maybe an ALSP can help. Are you utilizing reverse rfps? Plenty of options here. I hope all of this is helpful. In short, if you're inhouse, you don't need to just hope that you can cut enough, you can craft a strategic plan to make it happen! Good luck!

“Our budget was slashed again,” exclaimed a frustrated CMO from a $75mil SaaS company. “The remaining staff is depressed, and those who can are jumping ship--anyone have any ideas for me?” the CMO asked. And so began another CMO Huddle in the “hidden recession” of 2024. Before breaking down the potential solutions to this common challenge for many B2B CMOs, let’s reflect on the economic realities our recent research revealed: ⚡ 69% of B2B marketing leaders believe their industry is in a recession ⚡ 50% noted their company experienced layoffs ⚡ 69% were asked to do more with less budget ⚡ 76% are experiencing more pressure to deliver pipeline results [Note: The complete report will be released on 6/18/24. Ping me for a copy.] Now let’s tackle this CMO’s leadership challenge after layoffs and budget cuts. Most of the time, layoffs do not end up with the optimal mix of talent based on the reduced budget. Sure, you eliminated some weak performers. That’s always helpful. But the critical question is, given your new budget, do you have the right mix of talent? If you had started from scratch, is this the team you would have put in place? Rather than fretting about staffers jumping ship, think of that as an opportunity to right-size and rebuild with a team unburdened by what happened before. Look for “utility players” eager to tackle multiple roles and “Impact Players” as outlined in Liz Wiseman’s great book. These more flexible individuals will be invaluable as you look to stretch every penny. Now, on to allocating your smaller budget. The biggest mistake you can make is to cut each area equally. Instead, take a step back. Restart your strategic process. The budget will follow. A smaller budget requires more focus. First, your smaller staff won’t be able to cover the same ground they did before. Second, your overall reach is likely to drop or your dollars will be spread too thin to make an impact. But again, you need to tackle your go-to-market strategy before deciding on budget allocation. Here are some questions to help drive a more focused strategy: 🐧 Can you eliminate one or more products/services in your portfolio?   🐧 Can you drop a vertical market or two or refine your ICP? 🐧 Can you fixate on one vulnerable competitor and win more of those deals? 🐧 Can you reposition your product/service to make it more appealing to a specific target? 🐧 Can we adopt a more distinctive personality to help us cut through?  This exercise is about differentiation. Narrowing the target and finding your unique position, your most compelling point of difference. Once you have this, allocating your reduced marketing budget will almost be fun. Ultimately, a budget cut is a leadership opportunity for CMOs. Force the big-picture discussion. Remind your leadership team, “We can’t keep doing what we did before with fewer resources and expect better results.”  You can also promise them that a tighter strategy is the fastest path to innovation.