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⚡️️ How to Cut Burn and Extend Your Runway
Important callout: if your startup is in a dire situation, you may have no option but to cut headcount. Founders can sometimes wait too long to do this, don’t let that happen to your startup.
With that said, layoffs should be a last resort. Here are 7 things you can do before it gets to that point:
Temporarily Cancel All Corporate Credit Cards
Your startup is probably paying for various subscriptions it isn’t actively using or planning to use anytime soon. This is a bit of a hack to remove all of that spend (though your team may not like it).
Simultaneously cancel all of your corporate cards (including your own). Then, issue new cards to everyone on the team who had one before. Everyone will need to migrate over all of their subscriptions. You’ll find that they only actually do it for the ones they actually use.
It’ll cost you some time and productivity, but at a fast moving startup it can be hard to get everyone on the team to manually go through their expenses and identify what can be cut. This is a way around that.
If you do this, I recommend giving your team a heads up ahead of time so they can flag any critical expenses that you won’t want to risk pausing (i.e. infrastructure, paid acquisition channels, etc).
Join Your Customer Success Team
As a founder, you should already know that talking to and learning from your customers is a non-negotiable part of your job.
You should also know that it’s multiple times more expensive to acquire a new customer than retain an existing one.
If cash is tight you need to re-internalize both of those statements and, effectively, join your customer success team. What I mean is you should be the one getting on calls with users who are at risk of churning more often than not.
This is good for two reasons:
Customers love speaking to the founder. They may be more likely to stick around after speaking with you.
You’ll learn a lot more about what their concerns are. Try to identify patterns quickly so you can come up with solutions that will make a difference for your users.
Focus Growth Efforts on Content and Referrals
Marketing budgets tend to be the first things to get slashed when capital is tight.
This means that, at a time when it’s already harder for your startup to convince new customers to pay, your growth team also likely has a lower budget to make it happen with.
A good answer is to invest in content marketing (social media, newsletters, etc) and referrals. Why?
Content marketing can be free to create if you have someone on your team who can do it well (and anyone can learn if they put the time in) yet it can lead to big results (especially if you form relationships with people who can help amplify your content).
If you can afford to, it’s ironically a great time to pursue paid ads. Prices are down since fewer people are running them. But if you want your startup to reach venture scale you’ll likely need at least one scalable, organic channel anyway.
No matter what your approach is, don’t be timid towards growth. The best way to extend your runway is to bring in more revenue (efficiently).
Experiment with New Revenue Streams
It’s important to be hyper-focused during uncertain times, but one area that’s worth experimentation is how to increase sales.
Try new pricing strategies (tiered pricing?)
Develop a natural upsell for your users (in app purchases?)
Cashflow friendly partnerships
Don’t let this take up all of your mindshare, but don’t assume that what worked to grow revenue during 2021 or 2022 will work as well in the current environment.
Outsource Small Engineering Tasks on Replit
No, this isn’t a paid ad. I’ve recently discovered Replit and their engineering bounty system.
Unless you’re growing super fast, you probably aren’t able to hire too many engineers right now. Replit offers a cool solution where you can list a priced bounty for the completion of any engineering task, and someone will claim it and then send you the code.
It works best with self-contained, non-infrastructural tasks and the prices are reasonable.
Leverage AI and No Code Tools
There are so many new AI tools that Sequoia’s market map from October is already significantly out of date.
AI and no code tools both help you do things faster and cheaper. You probably can’t rely on them forever, as your startup grows you’ll be able to afford more customized and robust solutions, but, in most cases, they can hold systems and processes together longer than you’d think.
Go “Remote”
I’m an advocate for in person work in the early stages of a new startup. There’s magical serendipity (and, more importantly, quick decision making) that really is tough to replicate through a computer screen. But you don’t need your own office to make that happen.
Get a WeWork membership, or just work with your team at someone’s apartment while you’re still small enough to.
If you’re a bit further along maybe you’ve already transitioned to a hybrid environment. If you’re still IRL though, look for ways to reduce IRL costs in other ways:
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