Although we are only two months into 2019, a clear theme is starting to emerge: companies are cutting back on expenses. And when companies are in a cost-cutting mode, job cuts and layoffs usually follow. Through the month of January, the following companies announced significant layoffs in their organizations:
In total, over 2,100 media jobs were eliminated in January, and it looks like it will continue for the better part of the year.
This is also impacting Silicon Valley. Many startups and private equity (PE) funded companies are starting to feel the pressure of cutting back on expenses instead of focusing solely on the top line. Even well-known Silicon Valley “darlings” like Hustle and SpaceX are not immune to cutting back on lavish spending, i.e. flying business class and over-the-top parties.
Here’s a good rule of thumb: Not every trend or theme will apply to your business. It’s important to be knowledgeable about your industry, but it is more important to have a comprehensive understanding of your own company and its strengths and weaknesses in the marketplace. Even if one or a few competitors are feeling the heat, it does not mean that you cannot grow, or even profit, during signs of cutbacks or during signs of economic slowdowns.
Companies are successful when they exercise discipline over finances and marketing while continuously measuring return on investment — this is true whether the company is young, mature, or trying to sell. Sometimes it pays to take chances; however, it’s helpful to ground this spirit with a thrifty mentality. It’s much easier for a company to get in good habits by practicing expense management in the early stages of its origin. Just because a company is not in pain today does not mean it should ignore what tomorrow may bring.
AcceleratingCFO encourages companies to have cash and expense management policies and philosophies that reflect the right amount of discipline. Company leaders should consistently evaluate the merits of spending on all business decisions. They should ask the hard questions: Is this the wisest way to use our marketing budget? Can I fly in coach instead of first class? Is the 5-star hotel non-negotiable?
Take-away: Stay disciplined. Stay focused. Spend smartly to maximize your business. One of the ways to do this is to use budgeting and comparative analysis to determine if there is an issue. For a link to our article on the budgeting process, click here.
Co-founders & Managing Partners