Extracted From:

The Founder's Field Guide for Navigating This Crisis - Advice from Recession-Era Leaders, Investors and CEOs Currently at the Helm

If you’ve committed to the path of dramatically reducing your burn rate, First Round Capital has gathered advice below for the first step, cutting expenses. Find the second step under Headcount Considerations.

Try to bring down the burden of rent.

Outside of your team’s compensation, rent is likely one of the most significant line items in your budget. While your lawyer should review your contracts first, you may to want to consider these strategies:

• Rent abatement: Most landlords have developed leases that — when they contain force majeure clauses — still require the payment of rent during emergencies. The best approach to obtaining rent relief is a direct negotiation with your landlord — before they get inundated with requests. Many are open to restructuring a lease to provide for short-term relief. Try negotiating a temporary or permanent discount to your lease rates, or getting a discount in the form of a credit. (As an example, offer to stay current on your payment for the next three months, in exchange for two months tacked on for free at the end of your lease.) In deals known as blend and extend, some landlords are agreeing to no rent or lower rent for a period of time, with the foregone rent being added back and amortized over the monthly payments for the remainder of the lease. In many cases, those deals involve an extension of the lease.
• Downsizing: This is applicable particularly for companies who are in modular spaces (WeWork, Knotel, etc.) and can consolidate the space they need. Many of us may be working from home for the next 12-18 months, at least part of the time, in accordance with ongoing quarantines. Do you really need that office space? Can you get by with shared space, part-time space, a WeWork membership?

Clean up by running through this thought experiment.

“Ken Goldman recently shared that this is a great opportunity to tidy things up,” says First Round partner Bill Trenchard. “Since we haven’t been in an era of belt-tightening, many companies have probably gotten a little sloppy, racking up some expenses they don’t absolutely need. This is the time to clean it up. One startup I know cut 25% of their expenses — without cutting a single head. That means you're taking actions like getting rid of a bunch of perks that no one ever used. That’s a good first step that makes companies leaner and meaner.”

Here’s a thought experiment for every founder: Imagine it’s 18 months from now. Your company has run out of cash. What are the top five things you wish you hadn't spent money on?

Tactics for cutting expenses, recommended by current CEOs in the First Round community:

Here’s a handful of other tactical ideas, sourced from the First Round community:

• Be very careful about marketing spend, specifically on the enterprise side. Advertising costs may be cheaper, but you don’t know how the funnel will convert yet in this new environment.
• Cancel credit cards and issue new ones so you can zero out expenses quickly. This will end all recurring charges — and force the company to explicitly re-subscribe to all essential services. (Downside here is potentially losing important infrastructure that’s tied to cards, so be sure to do a sweep for that first.)
• Ask your team to look for savings and give them a percentage of everything that the company saved as a bonus. There is an amazing amount of money that can be saved if you go line by line through every expense you have. In a counterintuitive way, it all adds up.
• Look to try to lower the absolute cost of software subscriptions and eliminate seats or licenses that aren't mission-critical.
• Reconsider the services you have on retainers, such as PR firms.