Cutting Burn: A Framework for Prioritizing Cuts

Your runway model shows a 30% chance of running out before your next raise. You need to cut burn. But what do you cut first? The wrong decision can extend runway while killing the company.

The Cutting Mindset

Before any specific cut, establish the right framework:

"Cut to survive and thrive, not just to survive a little longer."

The goal isn't to extend runway by 3 months while crippling your ability to grow. It's to extend runway while preserving your path to either profitability or a fundable position.

The Priority Matrix

Evaluate each potential cut on two dimensions:

	Low Impact on Growth	High Impact on Growth
High Savings	Cut First	Cut with Caution
Low Savings	Cut if Easy	Don't Cut

Tier 1: Cut First (Low Pain, High Savings)

These cuts extend runway with minimal damage:

Office Space

• Downsize or go fully remote
• Potential savings: $10-50K/month depending on location
• Often has minimal productivity impact

Underperforming Marketing Channels

• Cut channels with poor CAC/LTV ratios
• Focus on channels that actually convert
• Savings vary but often 20-40% of marketing budget

Software and Subscriptions

• Audit all SaaS subscriptions
• Downgrade plans where possible
• Cancel unused tools
• Typical savings: $2-10K/month

Non-Essential Vendors

• Renegotiate contracts
• Move to cheaper alternatives
• Bring some functions in-house

Tier 2: Cut with Caution (High Savings, Higher Risk)

Planned Hires

Delaying or canceling planned hires is one of the most effective levers:

• Each delayed hire saves $10-25K/month fully loaded
• No severance or morale impact (unlike layoffs)
• Can be reversed when situation improves

But be strategic: don't delay hires that directly gate your next milestone.

Founder Salaries

Temporarily reducing founder compensation signals commitment:

• Often saves $5-15K/month per founder
• Sends signal to team and investors
• Can be restored when runway improves

Contractor and Agency Spend

• Bring critical work in-house
• Pause non-essential projects
• Renegotiate rates

Tier 3: Last Resort (Layoffs)

Layoffs are painful but sometimes necessary. If you go this route:

Cut Once, Cut Deep

Multiple small layoffs destroy morale. If you need to cut, cut enough to provide real runway—typically 12+ months.

Prioritize by Function

• Protect: Engineers building core product, salespeople with pipeline, customer success keeping revenue
• Reduce: Support staff that can be consolidated, recruiters (you're not hiring), marketing if channels are cut
• Evaluate: Management layers, specialists vs. generalists

Handle with Care

• Generous severance if possible (2-4 weeks per year)
• Extended health coverage
• Help with job placement
• Transparent communication with remaining team

The Runway Impact Calculation

For each potential cut, calculate:

1. Monthly savings: Direct cost reduction
2. One-time costs: Severance, lease termination, etc.
3. Runway extension: (Monthly savings × months) - one-time costs
4. Growth impact: Effect on revenue trajectory
5. Net impact: Is the runway worth the growth hit?

What NOT to Cut

Some cuts feel like savings but create larger problems:

• The person who knows everything: Institutional knowledge is irreplaceable
• Customer success during churn issues: Losing customers is more expensive
• Security and compliance: One breach costs more than years of investment
• The work that gets you funded: Cutting your path to the next milestone is cutting your lifeline

Sequencing Your Cuts

Don't cut everything at once. Create a sequence:

1. Immediate (Week 1): Tier 1 cuts—software, subscriptions, easy wins
2. Short-term (Month 1): Hiring freeze, marketing optimization, contractor review
3. If needed (Month 2-3): Founder salary cuts, office changes, deeper marketing cuts
4. Last resort: Layoffs, executed once with sufficient depth

Communication

How you communicate cuts matters as much as what you cut:

• Be transparent about the situation (without creating panic)
• Explain the reasoning behind specific decisions
• Show the path forward: "These cuts give us X months to achieve Y"
• Commit to a timeline for reassessment

A team that understands why cuts are happening will stay more motivated than one left guessing.