In 2022, S&P 500 companies increased spending by 50% on one luxury perk compared to the pre-pandemic era. What was it?

• Champagne

• Standing desks

• Massage therapy

• Private jets

Scroll to the bottom to find out!

Written by our editor, Catherine Solbrig.

Uh oh. Your revenue tanked.

What to cut when you suddenly don’t have the cash you expected.

Revenue plummeted suddenly, and your budget is shot. Something has to go on the chopping block, but you don’t have any fluff in your finances.

How do you decide what needs to go?

You have more space in your budget than you think. Put down the scalpel and start with a gentler treatment.

Step 1: Take some Benadryl. Metaphorically.

Revenue dips are like an allergic reaction – dangerous if untreated, and best resolved by addressing the root cause.

First, assess how bad it is. Do you need emergency intervention?

• Can you still make payroll?

• Can you deliver current orders?

• Can you keep operating your business?

Most cases aren’t life-threatening. You still need treatment, but you’ve got time to do it right.

Step 2: Diagnose the allergy

Your symptoms show you where to look for root causes.

Examples 👇️ 

• Website traffic dropped → Figure out what caused it with this guide. 

• Conversion rates tanked → Is your site broken? Have you changed products or prices?

• Returns and/or cancellations spiked → Have you been flooded with negative reviews? Is there a problem with your product?

• All metrics are down → What’s showing up in headlines that might change consumer behavior? Is this an existing downward trend?

And if you’re still stumped, make a list of all the recent changes you and your team have made in your business. Find the variable, and you’ll find the underlying trigger.

Can you fix it quickly? 

Great. Stop reading and do that.

No immediate fix? Read on.

Step 3: Heal the damage

Okay, you understand the cause, and might even have a plan to fix it. 

You still have an immediate budget problem.

Before you cut, add

Untapped opportunities can help bring your revenue back to healthy levels. Businesses find quick wins in:

• Promotions to existing customers

• Underutilized email lists

• Partnership opportunities

• Optimizing organic content that’s close to page 1 (getting it there makes all the difference)

This doesn’t have to be sustainable. It’s an EpiPen, a quick infusion of cash to keep you alive long enough to stabilize. 

So, go ahead. Get a little off-brand. Do the one-time-only discount. Let your marketing team get weird. You should only have to do this once, so repeatability isn’t an issue — just don’t do anything that will cause long-term damage to your business.

Optimize before you eliminate

The strongest troops deserve the reinforcements.

Pull budget away from mediocre campaigns to put more oomph into the stuff that makes money.

Forecast again (but with better information)

Yep, your budget was super wrong the first time you did it, but now you know more. Forecast your revenue again based on more realistic projections.

Now, you know how much more room you need to make.

Cut creatively

Anyone can cut luxuries (like the on-tap kombucha in your downtown office), but you can also negotiate necessities. If you’ve got a sales contact, there’s almost always room for negotiation.

The commercial real estate market is still tough, so talk to your landlord about reducing rent. Software contracts are flexible, too.

Negotiations can save your budget, but if you still need to do some pruning, turn to your team. People are a lot more likely to give up their perks with good cheer if you’re transparent and include them in the re-budgeting process.

Best case scenario: You don’t actually need to cut anything

Instead of asking “what do I cut to make my budget work?” try this:

“How can I fix these problems without needing to cut anything?”

Bet on your resourcefulness and creativity. Maybe you’ll still have to do some trimming, but you’ll save a lot more of your healthy budget if you start with the goal of cutting nothing.

Written by Amy Hawthorne.

What’s eating into Silicon Valley budgets?

When perks become problems.

In 2012, Yahoo! CEO Marissa Mayer wanted to make the company more Google-esque. 

One of her boldest moves? Free food — for everyone.

The people rejoiced… And $450 million was spent over 4 years.

The perk was likely to keep employees from taking a one way stroll down the street to Google’s headquarters. Yahoo had been stagnating while their opponent had captured well above 50% of Search.

Problem is, performance continued to decline and free food was just the tip of the iceberg. “Unnecessary Yahoo perks total half an Instagram,” said SpringOwl Asset Management in a presentation to Yahoo’s board.

On top of free catering, all employees got free iPhones and Jawbone UPs.

The ROI on perks probably wasn’t clearly quantified. Sure, perks boost employee retention, happiness and productivity, but there must be a point of diminishing returns.

Is investing hundreds of millions spent on giving well-paid employees free food worth it? In the end, catered lunches (along with around 84% of employees) were cut. Ouch.

7.7%

That’s how much of their total revenue companies budgeted for marketing in 2024 (Statista).

Before the pandemic, it was 11%. Since 2023, it’s hovered around 9.1%.

Companies feel like marketing spend is inefficient and are making cuts. Is yours? 

A great way to pressure test your budget is with David McClure’s Pirate Metrics.

McClure, a Silicon Valley investor and founder of over 500 startups, argues that companies focus too much on vanity metrics and should instead track these five:

• Acquisition – How are people finding you?

• Activation – Are they taking a meaningful first step?

• Retention – Are they coming back?

• Referral – Are they telling others?

• Revenue – Are they buying?

AARRR – say it out loud, get the name. 

Think of it as a funnel. You want to associate real KPIs with each stage and look at conversion rates from top to bottom. Then, layer in your budget, and start seeing where you might be overspending, where your conversion bottlenecks are, and how you should reallocate.

Example:

If you’re pouring 40% of your budget into Acquisition, but Activation is weak, that’s a leak.

Want to build a marketing budget from scratch (with a free template)?

👉️ Check out our 9-step guide.

This week’s edition by our editor, Catherine Solbrig.

DO

Give your employees real reasons to stay.

The best things in life (and retention) are free — work-life balance, honest recognition, and attainable growth opportunities — are way more appealing than gym memberships and artisan coffee. Pricey perks feel cheap to employees who just want a fulfilling job and a happy life.

DON’T

Budget based on vibes.

Revenue forecasting is tricky business, but setting a budget without forecasting is just bad business. Startups get away with budgeting as they go, but the more you grow, the bigger the consequences when you fail to plan. Believe it or not, most of your revenue dips can be forecast in plenty of time to prepare.