Startup Finance
Cutting burn badly is as dangerous as not cutting it. Here are the 7 levers you should use —in order— and the areas you should never cut.
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Create a free accountCutting the burn rate is the favorite sport of founders when runway gets short. But doing it well is harder than it looks. A bad cut can save a month of cash while killing growth, demotivating the team or destroying the product's ability to ship. In this guide we explain how to reduce burn without breaking what makes your business work.
The obvious answer is "when you run out of cash." But that is too late. The right moments to act are:
Before you cut, classify all your expenses into 4 categories. This is critical because cutting the wrong category is devastating:
The expenses that, if cut, stop the business from operating: minimum infrastructure, core team, essential tools. In a SaaS, the servers belong here. In an agency, the designers who execute the projects.
Marketing, sales, hiring for new roles. Cutting here slows growth but does not paralyze operations. It is where people tend to cut the most, but also where the most damage can be done if the cut is excessive.
Office, travel, events, duplicate SaaS tools, "nice to have" tools. Most of them can be eliminated or reduced with no real impact.
Forgotten subscriptions, services nobody uses, auto-renewed annual contracts. An annual audit of these usually reveals 10-15% of spending that is entirely removable.
Always start here. List every active subscription, who uses it, what value it adds. Cancel the duplicates, the ones nobody uses, and the ones that are "nice to have" in hard times. Typical impact: 5-15% of your software spend.
Everything is negotiable: software, hosting, logistics, professional services. A well-written email asking for a discount for paying annually or for loyalty usually gets results. The worst that can happen is a "no."
Pause any channel without clear ROI. Keep only what has measurable, positive metrics. "Brand" channels are the first to go in times of belt-tightening.
Even open positions. Each new person is recurring spend plus onboarding cost. In moments of financial stress, a hiring freeze is the fastest signal of discipline.
If you have a physical office, it can be one of your biggest line items. Negotiating with the landlord, subletting, or moving to a remote/hybrid model can free up a lot of capital.
Before touching the team, founders and managers should be the first to accept a reduction. It is a powerful signal and usually buys you 2-3 extra months of runway without affecting execution.
Letting people go. It is the most painful option and the slowest to carry out. If you get here, do it once and thoroughly — never in successive rounds — and treat the people affected with all the generosity you can (severance, references, help finding a new role). How you lead this defines your reputation as a founder.
The team notices everything. If they see projects canceled, hiring paused or perks disappear with no explanation, their imagination runs wild: "is the company in trouble? should we be looking for a job?" The result is that the best people start leaving even before you make the hard decisions.
The rule is clear: when you reduce burn significantly, communicate the plan openly with the team. Explain why, what will happen, what the expectations are for the coming months. Silence does more damage than the bad news.
Reducing burn rate is not about cutting expenses at random. It is a strategic decision about what to prioritize when resources are limited. Done well, it extends your runway without destroying your ability to grow. Done badly, it saves a month but sinks the business.
If you want to calculate how much you would extend your runway with each level of cuts, use our runway calculator.
Hayes Strategic shows you how each reduction affects your runway in real time.