This is exactly the pattern I write about. The saving appears immediately on the P&L. The damage appears months later in churn, distrust and lost relationships, by which point the connection to the original decision has been completely forgotten.
Customer success is not overhead. It is a driver. And cutting drivers to fund AI adoption is one of the most expensive short term measures a business can make.
The other point to dig into, Nadia, is, what’s the experience and seniority level of the people you’re letting go?
Letting go of senior people has the biggest short-term cost savings impact.
But you’ve also lost the people who carry culture and share what “good” looks like for everyone else.
Letting go of entry-level people in favor of AI may be the bigger use case for most companies.
But you’ve also lost the irreplaceable experience of someone who came up through the organization- where will your future senior leadership come from, if not from your own entry-level people…?
This is a very good point Mike Goitein. Senior people carry institutional memory, culture and the unwritten standards that tell everyone else what good looks like. When they leave that knowledge walks out with them and does not come back.
At the same time every business operates within real financial constraints. If measures are needed they have to be taken. The question is whether those decisions consider the medium and long term consequences, not just the short term savings.
Every founder ultimately wants a business that is successful, sustainable and creates value for themselves, their team and the wider community they serve.
The decisions made in hard times either protect that vision or quietly undermine it. The damage shows up much later.
The framing of the impact of these cuts with those 4 key questions is simple but many people don’t take the time to look at these cuts with this important lens.
Thank you. The four questions are simple by design, because the most useful frameworks usually are. Taking the time to ask them before cutting rather than after is what most founders skip, precisely because the pressure to act fast feels more urgent than the pressure to think clearly.
The Hard Wall 🧱 is rapidly coming towards you where you'll flame out. No easy options.
Cut costs to default alive - zero burn / adding cash
Can't get big so get niche or get out - ie get hyper narrow or prep for exit now you're not bleeding cash.
Prices Law - the square root of the population generate 50% of the value - go founder mode, small team of developers and find a single channel or sales motion where the unit economics have to work.
Yes, you can remove more than 50% of your cost base (in theory)
If no cac model works then the answer is simple - spend zero on cac - maybe licence your technology or play a longer game.
More and more options than this I've noted but more of the same isn't one of them
Often an entire mental shift is required
Lastly - we're all simply burning time on the planet. If it's simply NOT going to work - invest your most value asset called "TIME" into something else
Completely agree @Chris Tottman on the mental shift and on the urgency of getting to default alive before anything else.
The hardest part is that founders often do not know their real burn rate or cash position clearly enough to make these decisions with confidence. Visibility has to come before the cuts.
I strongly believe any startup should work toward a balanced business model as early as possible. The approach of investing heavily in growth and becoming profitable later is extremely risky, especially in difficult markets. Starting with a small team and strengthening capacity during scaling rather than before it is the more sustainable path.
For more mature businesses the risk is different. The temptation in hard times is to cut the costs that ensure future growth, the drivers that are building the pipeline, the relationships, the delivery capacity.
As long as the business is generating profit and cash that allows a balanced model to be sustained, those growth seeds should be preserved not killed.
Hard times pass. The damage done to growth capacity during them does not always recover.
The numbers matter, but they only make sense once you understand what’s really moving the business and what people on the ground actually need to keep performing.
I experienced this firsthand recently.
A large, global SaaS company cut customer success staff to invest in AI.
But they destroyed the trust and relationships they'd built through their hard-working people.
We're gradually distancing ourselves from the company and its platform.
I'm sure it seemed like a good idea at the time, but so short-sighted.
Thank you for the restack @Mike Gotein!
This is exactly the pattern I write about. The saving appears immediately on the P&L. The damage appears months later in churn, distrust and lost relationships, by which point the connection to the original decision has been completely forgotten.
Customer success is not overhead. It is a driver. And cutting drivers to fund AI adoption is one of the most expensive short term measures a business can make.
The other point to dig into, Nadia, is, what’s the experience and seniority level of the people you’re letting go?
Letting go of senior people has the biggest short-term cost savings impact.
But you’ve also lost the people who carry culture and share what “good” looks like for everyone else.
Letting go of entry-level people in favor of AI may be the bigger use case for most companies.
But you’ve also lost the irreplaceable experience of someone who came up through the organization- where will your future senior leadership come from, if not from your own entry-level people…?
This is a very good point Mike Goitein. Senior people carry institutional memory, culture and the unwritten standards that tell everyone else what good looks like. When they leave that knowledge walks out with them and does not come back.
At the same time every business operates within real financial constraints. If measures are needed they have to be taken. The question is whether those decisions consider the medium and long term consequences, not just the short term savings.
Every founder ultimately wants a business that is successful, sustainable and creates value for themselves, their team and the wider community they serve.
The decisions made in hard times either protect that vision or quietly undermine it. The damage shows up much later.
The framing of the impact of these cuts with those 4 key questions is simple but many people don’t take the time to look at these cuts with this important lens.
Thank you. The four questions are simple by design, because the most useful frameworks usually are. Taking the time to ask them before cutting rather than after is what most founders skip, precisely because the pressure to act fast feels more urgent than the pressure to think clearly.
The Hard Wall 🧱 is rapidly coming towards you where you'll flame out. No easy options.
Cut costs to default alive - zero burn / adding cash
Can't get big so get niche or get out - ie get hyper narrow or prep for exit now you're not bleeding cash.
Prices Law - the square root of the population generate 50% of the value - go founder mode, small team of developers and find a single channel or sales motion where the unit economics have to work.
Yes, you can remove more than 50% of your cost base (in theory)
If no cac model works then the answer is simple - spend zero on cac - maybe licence your technology or play a longer game.
More and more options than this I've noted but more of the same isn't one of them
Often an entire mental shift is required
Lastly - we're all simply burning time on the planet. If it's simply NOT going to work - invest your most value asset called "TIME" into something else
💙
Completely agree @Chris Tottman on the mental shift and on the urgency of getting to default alive before anything else.
The hardest part is that founders often do not know their real burn rate or cash position clearly enough to make these decisions with confidence. Visibility has to come before the cuts.
I strongly believe any startup should work toward a balanced business model as early as possible. The approach of investing heavily in growth and becoming profitable later is extremely risky, especially in difficult markets. Starting with a small team and strengthening capacity during scaling rather than before it is the more sustainable path.
For more mature businesses the risk is different. The temptation in hard times is to cut the costs that ensure future growth, the drivers that are building the pipeline, the relationships, the delivery capacity.
As long as the business is generating profit and cash that allows a balanced model to be sustained, those growth seeds should be preserved not killed.
Hard times pass. The damage done to growth capacity during them does not always recover.
Loads of great wisdom here. Thanks for sharing Nadia
Cutting overhead and cutting drivers look the same on paper.
Indeed so. On paper they both reduce expense, but in reality one removes waste while the other weakens revenue capacity.
So fundamental, understanding what drives the business, so crucial, understanding what motivates the workers.
A cost review is never only about numbers. It is also about understanding what creates performance and what keeps people committed to the work.
The numbers matter, but they only make sense once you understand what’s really moving the business and what people on the ground actually need to keep performing.
Some deals are done on just that alone.
Yes, trust and relationship capital often sit behind revenue long before the contract is signed.