Strategic Cost-Cutting for Startup Founders: Extending Runways Beyond 2024

Presented by Planful

The Rollercoaster Ride of Founders

Founders have faced a rollercoaster ride over the past few years, starting with the pandemic that ground the economy to a halt. This was followed by a growth-at-all-costs era fueled by cheap money and low technical barriers to entry. However, a talent crisis hampered that growth, and most recently, a funding crunch has made cash preservation paramount.

Extending Runways Beyond 2024

With growing global instability and rising capital costs, founders must now find ways to extend their runways beyond 2024 to avoid failure. While many have already made necessary cuts to discretionary costs and unnecessary expenses by analyzing data, this next round of cost-cutting requires a more strategic and thoughtful approach in order for businesses to survive and thrive in 2025.

“Founders are dreamers and risk-takers, even if they don’t know it. I’ve often said that to do a startup one must have a healthy mix of naivety and arrogance, because statistically the vast majority of startups fail.” – Grant Halloran

The startup world functions through pitches and funding rounds, creating a validation trap for many founders. When securing funding becomes the primary goal, founders fall into the trap of believing their ideas and approach are validated. However, successful founders recognize the odds stacked against them and focus on survivability, moderate growth, and extending runways to convince customers and investors that they have a plan to make it through.

Strategic and Thoughtful Cost-Cutting

While many founders take a spreadsheet-based approach to cost-cutting, it is important to avoid ruthless and thoughtless blanket cuts. Instead, founders should be frugal about what doesn’t matter while maintaining or moderately investing in what does matter for the business. It’s crucial to prioritize people and company culture, especially during tough times. Thoughtful cost-cutting creates visible reminders of the current environment without eliminating essential elements that contribute to a robust culture.

“Instead of quarterly in-person employee meetups, move to annual and replace the others with a DoorDash gift card and a video meeting. Curtailing all travel, both sales calls and team meetups, not only hurts morale but also allows justifiable excuses for missed targets, lost deals, and churned customers.” – Grant Halloran

Visibility is key when making cost-cutting measures. Showing employees the value of the cuts and how they extend the runway helps foster understanding and support. It’s important to go beyond just looking at the data; collaborate and align across the business to turn financial performance into a team sport. Utilize data to identify areas for trimming and uncover waste that can be cut.

The Importance of People

Ultimately, the survival of the company depends on the people. Cutting employee engagement, culture-defining elements, and crucial investments can lead to key employees leaving and hinder the company’s progress. By prioritizing people, explaining the reasons behind the cost-cutting measures, and being transparent, founders can ensure the survival of their companies and set the stage for future growth and success.

“Your mission is the survival of your company, above all else. Later you can return to growth, and will probably be a better company for what you experienced in this survival phase.” – Grant Halloran

By extending runways beyond 2024 through strategic cost-cutting measures, founders can navigate the challenges of an uncertain future and position their businesses for long-term success.

Grant Halloran is Chief Executive Officer of Planful.

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