Do I need to cut costs?
Over the last couple of weeks, I’ve had some anxious conversations with business owners who are looking at their workload, and their staff and wondering, “Do I need to make some cuts?”
To answer that question, we need to have a solid look at your finances, and a point-of-view about what the future holds. How can we decide if we need to cut costs (and by “cut costs” we mean lay people off, there’s nowhere else to save significant money in most of my client’s companies) if we don’t know what the future demand is going to be?
Instead of trying to predict the future, what if we work backward?
What do you want the state of your company to be at year-end?
You want to be thriving, right? You want to have money in the bank, new clients on the books, and a happy and healthy workforce!
Let’s assume you will need cash AND a happy, healthy workforce to bring in the new clients. Does that make sense?
Then we have to ask ourselves. Which is likely to be more plentiful between now and the end of the year, cash or good employees?
We already know that unemployment is sky-high! There are good people on the street already.
I bet that it’s going to be harder to find cash between now and year-end than it is to find employees.
Plus, when you are struggling to make payroll every month, it leaves little energy and focus for the hustle you’re going to need to bring in new clients.
So we need to hold onto cash now, even if it means letting go of some team members.
OK, but how deep should we go?
As deep as you can, but not too deep! (Helpful, right?)
I’ve never talked to a business owner who told me, “I should have waited longer before making cuts,” but I’ve spoken to a lot of business owners who would say, “I wish I would have made cuts sooner.”
It’s better to make one hard, deep, set of cuts, cutting until the company is cash positive with the clients you have on the books now. You don’t want your team to live with the uncertainty of waiting for who gets cut this time. Do it once, and then you can build from there.
I know this is a tough conversation. I don’t enjoy having it. But for some firms, the survival of your business is at stake. If you need help, hit reply. I read every response and respond to most. We can get on the phone and look at your situation so you can gain clarity and move forward.