Where (and When) To Cut Costs When Your Business is Struggling

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0:30 It’s scary, some moments are exciting, some moments are scary because you don’t know what to expect, and there’s going to be moments where your business starts struggling, and you’re not making as much money. You still could be profitable. You may lose a lot of money. You may lose that one big contract that’s making the majority of your income, and you may even have staff. And I get this question a lot. People are like, hey where should I cut back? Who should I fire? What departments?

1:00 You know where you should cut back when things are starting to go bad? Yourself. Do you need that new car? Do you need that TV? Do you need that fancy home? Cut back on yourself. I tell people, and people think I’m crazy for this, I’m in my 30s. If things got bad, I wouldn’t cut back, and I would move in with my mom and dad. And yes I’m lucky I’m in a position where my mom and dad would be gladly happy to have me home, but I believe that when times are tough, you should first take from your bank account and not the people who are working with you.

1:30 You have to remember, your business will never get to where it is without your team members. I was once doing a conference in Brazil with Richard Branson. He and I were speaking there on the same day. And we were talking, and he mentioned to me, your team, the people that you have, is what makes your business. Without them, you’ll never create a big business. Elon Musk didn’t create Tesla and SpaceX by himself. Yes, he’s smart, he’s brilliant. But it’s the people that build the company. Don’t ever forget that. So when times are tough don’t cut back from other people.

2:00 Don’t start laying people off. Cut back from your own pockets. Cut back from your expenses. And ideally, be frugal with your money so that way you have a reserve when there’s a rainy day. And sure, once you’re out of the rainy day, and you have to make some cuts, yes I understand, business is business and sometimes you’re in a position where you have no choice but to make some cuts, and then you can figure out what departments to cut, you can have an open conversation with some people on your executive team. You can even have an open conversation when times are getting touch with your workforce and let them know in advance that you’re taking the brunt force of it, you’re going to be moving back in with your parents, you’re going to be taking all the expenses.

2:30 But if you keep going forward and you’ve dried up with all the money, and you have no choice you can talk to your team. You’ll be shocked. When we were in bad times and sometimes when we struggled, and we used all our money, my co-founder and I did, we had team members who were still willing to work and help out for free. And some of them have been with me still for 11, 12 years. It’s because when times are tough, I’ll do whatever I can to take care of everyone else and then when I still can’t help out, we’re a family, a lot of them are willing to cut back. But I have that relationship with some of the people on my team.

3:00 And you know what’s funny? When times started getting better, I went back and reimbursed them for everything that they put into their pockets. They didn’t expect that. They didn’t ask for it. But that’s the least I can do. And I would even give them interest for it or equity in the business as well for helping out. So when times are tough, cut back from yourself. Look in the mirror, figure out what you’re doing that you don’t need and cut back.

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