Cost cutting

I think the basic premises, why companies go for cost-cutting is because they think its an instant relief to their cash management. I believe a lot of you will agree that such tactics (not strategic) are myopic.

Cutting cost should replace by prioritizing cost. We have to create a three tier cost structure , where cost should be clubbed under three tiers

Golden Cost: Long-term and short term investments that are immediately affecting my cash-inflow from a strategic point of view. This cost should be least altered as any apathy toward them will take the fleet down E.g. Salary/incentives of Sales folks,


Silver Cost: These investments are those cost which have medium to long-term impact on the business cash-flow. E.g. Leasing a new office for a 90 people. We have to speak to the operations, HR, Technology team if its possible to facilitate at least 50% of this new head counts to work form home , this will help reduce the cash-out flow on 45 seats.

Iron(ing) Cost: These are real cost that is not directly matched to top line. E.g. 45K USD Print advertisement by Grocery retail chain for weekend offer in a national daily is difficult to ascertain how many readers got converted into footfalls.
Rather a below the line event involving 20K USD around the housing communities around the retail chain, can help us track actual contribution of ad-spend to top line.


The basic thumb rule should be: Will a cut on this cost affect my cash-flow adversely in the next 3-15 Months time frame.