Cost Reduction Playbook

COST REDUCTION PHILOSOPHY

Understanding Strategic Cost Management

COST REDUCTION FUNDAMENTALS

WHY COST REDUCTION MATTERS:
☐ Extends runway during uncertain times
☐ Improves profitability and efficiency
☐ Demonstrates financial discipline
☐ Prepares company for downturn
☐ Increases optionality

CEO'S ROLE IN COST REDUCTION:
☐ Own the difficult decisions
☐ Communicate clearly and honestly
☐ Protect company culture
☐ Make decisions quickly
☐ Avoid death by a thousand cuts

THE COST REDUCTION REALITY:
"Cost reduction isn't about being cheap.
It's about being thoughtful about where
every dollar goes. Done right, it makes
you stronger. Done wrong, it destroys
morale and your best people leave."

WHEN TO CUT COSTS:
☐ Market downturn affecting business
☐ Missed revenue targets significantly
☐ Runway dropping below 18 months
☐ Unit economics not working
☐ Preparing for efficient growth period

COMMON COST REDUCTION MISTAKES:
☐ Cutting too shallow (needing to cut again)
☐ Across-the-board cuts (vs. strategic)
☐ Cutting muscle, not just fat
☐ Poor communication to team
☐ Not preserving cash runway targets
☐ Cutting too slowly (death by 1000 cuts)

THE CARDINAL RULE:
"If you need to cut, cut deep once.
Multiple small cuts destroy morale
and make your best people leave
while the worst hang on."

---

COMPREHENSIVE COST REDUCTION FRAMEWORK

Cost Reduction Playbook

═══════════════════════════════════════
COST REDUCTION PLAYBOOK
═══════════════════════════════════════

COMPANY: _______________
Assessment Date: _______________
Decision Deadline: _______________

═══════════════════════════════════════
SECTION 1: SITUATION ASSESSMENT
═══════════════════════════════════════

CURRENT FINANCIAL STATE:
Cash: $_____________
Monthly Burn: $_____________
Current Runway: _____ months
Target Runway: _____ months
Required Reduction: $_____________/month

TRIGGER FOR COST REDUCTION:
☐ Revenue miss >20% of plan
☐ Runway below 12 months
☐ Market downturn/uncertainty
☐ Failed fundraise
☐ Unit economics not working
☐ Board directive
☐ Proactive efficiency initiative

URGENCY LEVEL:
☐ Critical (act within 2 weeks)
☐ High (act within 4 weeks)
☐ Medium (act within 8 weeks)
☐ Low (optimize over time)

═══════════════════════════════════════
SECTION 2: CURRENT COST STRUCTURE
═══════════════════════════════════════

MONTHLY SPEND BY CATEGORY:
┌─────────────────────────────────────┐
│ PEOPLE COSTS:                       │
│ Salaries & wages:      $___________ │
│ Benefits:              $___________ │
│ Payroll taxes:         $___________ │
│ Contractors:           $___________ │
│ Recruiting:            $___________ │
│ Training:              $___________ │
│ ─────────────────────────────────   │
│ People Subtotal:       $___________ │
│ (____% of total spend)              │
│                                     │
│ TECHNOLOGY:                         │
│ Cloud/hosting:         $___________ │
│ Software/SaaS:         $___________ │
│ Dev tools:             $___________ │
│ Communication tools:   $___________ │
│ Data/analytics:        $___________ │
│ ─────────────────────────────────   │
│ Technology Subtotal:   $___________ │
│ (____% of total spend)              │
│                                     │
│ MARKETING:                          │
│ Paid advertising:      $___________ │
│ Content/SEO:           $___________ │
│ Events:                $___________ │
│ Marketing tools:       $___________ │
│ Agency fees:           $___________ │
│ ─────────────────────────────────   │
│ Marketing Subtotal:    $___________ │
│ (____% of total spend)              │
│                                     │
│ FACILITIES:                         │
│ Office rent:           $___________ │
│ Utilities:             $___________ │
│ Office supplies:       $___________ │
│ Equipment:             $___________ │
│ ─────────────────────────────────   │
│ Facilities Subtotal:   $___________ │
│ (____% of total spend)              │
│                                     │
│ G&A / OTHER:                        │
│ Legal:                 $___________ │
│ Accounting:            $___________ │
│ Insurance:             $___________ │
│ Travel:                $___________ │
│ Other:                 $___________ │
│ ─────────────────────────────────   │
│ G&A Subtotal:          $___________ │
│ (____% of total spend)              │
│                                     │
│ ═════════════════════════════════   │
│ TOTAL MONTHLY SPEND:   $___________ │
└─────────────────────────────────────┘

BENCHMARK COMPARISON:
| Category | Current % | Benchmark | Gap | Over/Under |
|----------|-----------|-----------|-----|------------|
| People | ___% | 60-70% | ___pts | ☐ Over ☐ Under |
| Technology | ___% | 5-10% | ___pts | ☐ Over ☐ Under |
| Marketing | ___% | 10-20% | ___pts | ☐ Over ☐ Under |
| Facilities | ___% | 3-8% | ___pts | ☐ Over ☐ Under |
| G&A | ___% | 5-10% | ___pts | ☐ Over ☐ Under |

═══════════════════════════════════════
SECTION 3: COST REDUCTION OPTIONS
═══════════════════════════════════════

TIER 1: QUICK WINS (Implement in < 30 days)
Low impact on operations, minimal risk

| Action | Monthly Savings | One-time Cost | Priority |
|--------|-----------------|---------------|----------|
| Cancel unused subscriptions | $_____ | $0 | ☐ 1 ☐ 2 ☐ 3 |
| Downgrade software tiers | $_____ | $0 | ☐ 1 ☐ 2 ☐ 3 |
| Pause discretionary travel | $_____ | $0 | ☐ 1 ☐ 2 ☐ 3 |
| Freeze non-critical hiring | $_____ | $0 | ☐ 1 ☐ 2 ☐ 3 |
| Reduce marketing spend | $_____ | $0 | ☐ 1 ☐ 2 ☐ 3 |
| Cancel events/conferences | $_____ | $0 | ☐ 1 ☐ 2 ☐ 3 |
| Reduce office perks | $_____ | $0 | ☐ 1 ☐ 2 ☐ 3 |
| Renegotiate vendor contracts | $_____ | $0 | ☐ 1 ☐ 2 ☐ 3 |
| ──────────────────────── | ───────── | ───────── | ───────── |
| TIER 1 TOTAL | $_____ | $_____ | |

TIER 2: STRUCTURAL CHANGES (Implement in 30-90 days)
Significant impact, requires planning

| Action | Monthly Savings | One-time Cost | Priority |
|--------|-----------------|---------------|----------|
| Reduce headcount | $_____ | $_____ | ☐ 1 ☐ 2 ☐ 3 |
| Compensation reductions | $_____ | $0 | ☐ 1 ☐ 2 ☐ 3 |
| Reduce/eliminate bonuses | $_____ | $0 | ☐ 1 ☐ 2 ☐ 3 |
| Office space reduction | $_____ | $_____ | ☐ 1 ☐ 2 ☐ 3 |
| Outsource functions | $_____ | $_____ | ☐ 1 ☐ 2 ☐ 3 |
| Reduce contractor spend | $_____ | $0 | ☐ 1 ☐ 2 ☐ 3 |
| Consolidate tools | $_____ | $_____ | ☐ 1 ☐ 2 ☐ 3 |
| ──────────────────────── | ───────── | ───────── | ───────── |
| TIER 2 TOTAL | $_____ | $_____ | |

TIER 3: LONG-TERM OPTIMIZATION (90+ days)
Major changes requiring significant planning

| Action | Monthly Savings | One-time Cost | Priority |
|--------|-----------------|---------------|----------|
| Org restructure | $_____ | $_____ | ☐ 1 ☐ 2 ☐ 3 |
| Product line rationalization | $_____ | $_____ | ☐ 1 ☐ 2 ☐ 3 |
| Technology architecture change | $_____ | $_____ | ☐ 1 ☐ 2 ☐ 3 |
| Geographic optimization | $_____ | $_____ | ☐ 1 ☐ 2 ☐ 3 |
| Automate manual processes | $_____ | $_____ | ☐ 1 ☐ 2 ☐ 3 |
| ──────────────────────── | ───────── | ───────── | ───────── |
| TIER 3 TOTAL | $_____ | $_____ | |

═══════════════════════════════════════
TOTAL SAVINGS SUMMARY
═══════════════════════════════════════

| Tier | Monthly Savings | One-Time Cost |
|------|-----------------|---------------|
| Tier 1 (Quick Wins) | $_____ | $_____ |
| Tier 2 (Structural) | $_____ | $_____ |
| Tier 3 (Long-term) | $_____ | $_____ |
| **TOTAL** | $_____ | $_____ |

Target Reduction: $_____/month
Identified: $_____/month
Gap: $_____/month

New Monthly Burn: $_____
New Runway: _____ months

═══════════════════════════════════════
SECTION 4: HEADCOUNT REDUCTION
═══════════════════════════════════════

(If applicable - handle with care)

HEADCOUNT ANALYSIS:
Current headcount: _____
Target headcount: _____
Reduction needed: _____ (____%)

REDUCTION APPROACH:
☐ Performance-based (bottom 10-15%)
☐ Role/function elimination
☐ Combination

SEVERANCE PLANNING:
| Tenure | Severance | Health Coverage | Total |
|--------|-----------|-----------------|-------|
| <1 year | ___ weeks | ___ months | $_____ |
| 1-2 years | ___ weeks | ___ months | $_____ |
| 2+ years | ___ weeks | ___ months | $_____ |

Total severance budget: $_____
(One-time cost to achieve savings)

ROLES TO ELIMINATE:
| Role | Department | Reason | Severance |
|------|------------|--------|-----------|
| | | | $ |
| | | | $ |
| | | | $ |
| | | | $ |
| | | | $ |

CRITICAL ROLES TO PROTECT:
☐ _______________
☐ _______________
☐ _______________
☐ _______________

═══════════════════════════════════════
SECTION 5: IMPLEMENTATION PLAN
═══════════════════════════════════════

WEEK 1: ANALYSIS & DECISION
☐ Complete cost analysis
☐ Identify all options
☐ Make final decisions
☐ Legal review (if headcount)
☐ Board notification
☐ Prepare communications

WEEK 2: EXECUTION
☐ Day 1: Announce changes
☐ Conduct separation meetings
☐ All-hands communication
☐ Implement immediate cuts
☐ Begin vendor negotiations
☐ Support departing employees

WEEKS 3-4: STABILIZATION
☐ Monitor team morale
☐ Redistribute responsibilities
☐ Complete vendor negotiations
☐ Update budgets/forecasts
☐ Close out severance
☐ Individual check-ins

ONGOING: MEASUREMENT
☐ Track actual vs. planned savings
☐ Monitor for unintended consequences
☐ Address any gaps
☐ Adjust if needed

Communication Templates

═══════════════════════════════════════
COMMUNICATION GUIDELINES
═══════════════════════════════════════

ALL-HANDS COMMUNICATION:
1. Be direct about the situation
2. Take responsibility (don't blame economy)
3. Explain why this is necessary
4. Share the impact (numbers)
5. Explain how decisions were made
6. Describe support for affected employees
7. Acknowledge difficulty
8. Share path forward
9. Leave time for questions

KEY MESSAGES:
• Why: _______________
• What: _______________
• How we decided: _______________
• What's next: _______________
• How we're supporting affected employees: _______________

MANAGER TALKING POINTS:
☐ Acknowledge team's feelings
☐ Answer what you can
☐ Don't speculate on what you don't know
☐ Focus on path forward
☐ Be available for 1:1s

SEPARATION MEETING SCRIPT:
"[Name], I need to share some difficult news.
Due to [reason], we've made the difficult
decision to eliminate your position. This
is effective [date]. I want you to know
this is about the role, not your performance.
[Detail severance]. I'm sorry we're in this
situation. How can I help you?"

Cost Reduction Tracker

Week	Action	Planned Savings	Actual Savings	Status
1	Subscription audit	$_____	$_____	☐
2	Vendor negotiations	$_____	$_____	☐
3	Marketing reduction	$_____	$_____	☐
4	Headcount changes	$_____	$_____	☐
5-8	Implementation	$_____	$_____	☐
Total		$_____	$_____

---