How to Successfully Cut Costs in Tough Times

The cost-cutting pressure is greater than ever before.

Many CEOs and boards are cutting back on company expenses. They’re demanding that companies trim a significant amount of fat to get through the hard times.

If you are a VP of Sales that has been told to cut costs, the best way is to minimize damage to your company and team by not cutting pay or commissions. How to successfully cut?


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Go through a variety of filters to zero in on the leads you want to reach. This is crazy specific, but you could find all the people that match the following: 

  • A company in the Financial Services or Banking industry
  • Who have more than 10 employees
  • That spend money on Adwords
  • Who use Hubspot
  • Who currently have job openings for marketing help
  • With the role of HR Manager
  • That has only been in this role for less than 1 year
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Start Small

It’s a tough job, but it is necessary when the time comes.

When it comes on how to successfully cut, companies should be careful about what they cut and how.

If you’re not being as precise with your words, it can have a negative effect on company performance.

As a company, we should be looking for ways to increase our revenue and not decrease it. However, if there are weak links or unnecessary roles on your team that can be cut without hurting the sales process too much then you might want to consider cutting these costs.

When hiring new employees, be aware of who is likely to not succeed and then let them go.

Next, take a look at newer salespeople who are not scaling the way you want. Cut carefully from the bottom and work your way up.

Check out the tools your team is using and see if there’s any software that could help them be more efficient or anything they aren’t using for a reason. If you find something, it’s an easy way to reduce spending.

Sometimes, it pays to spend a little more money on something that will help you save in the long run. Look at upgrading your tech stack with solutions that can help boost productivity and do more for less during these uncertain times.

Layoffs and Reduced Salaries

So now that you have an idea on how to successfully cut the most obvious positions, what do you do if there are more cuts?

If you can’t afford to keep your team and need to cut back, the only two options are firing quality employees or lowering salaries for all of them.

Neither option is easy, and there are serious consequences for both.

Layoffs

When it comes to layoffs, the best thing that a company can do is cut all at once. If you have several rounds of layoffs, morale will be destroyed and focus on your team won’t exist.

That’s why you don’t want to cut deeper than necessary; no one knows how long this situation will last.

The tradeoff is that if you make a large cut, then risk cutting too much and losing your employees. But the other option is to make smaller cuts as needed based on how long this recession drags out.

There isn’t a right answer, but you have to ask yourself what information you have and make the best decision possible.

Cutting Salaries

When cutting salaries, it is better to cut the base pay than lower bonuses. When there are still large commissions and healthy incentives for salespeople, they will be more motivated.

You don’t want your top salespeople to start looking for another job because of the base pay. They care more about their commission, so you should focus on that instead.

Even during a bad economy, your top salespeople still have many options for employment.

If you’re dealing with employees who are less bonus-driven, it may be possible to avoid firings or furloughs by lowering everyone’s pay across the board. It might not be popular but if you’re honest about the problem most people would rather see their salary drop than lose their paycheck and healthcare altogether.

One way to make up for it is by transitioning to a 4-day work week, with everyone taking a 20% base salary reduction. Bonuses continue and everybody keeps their health insurance while having 3 days off from working during the weekend.

Be Careful With Who You Cut

When it comes on how to successfully cut, it’s a quick way to save money if you don’t lose someone who brings in more than they take away. 

Companies are firing reps who bring in $750,000 a year for companies that only cost them $200,000. Those reps were paying themselves by bringing in more money than they actually cost the company.

As a sales leader, it’s important to show the CFO what they stand to lose if you fire an underperforming rep. Break down how much your reps cost versus how much money they bring in on a monthly basis.

Do your best to support top-performers. They’ve already worked hard for you, now it’s time for them to see that you care about their efforts.

Adjust the Compensation Plan

Margin compression is a huge problem in any economic downturn.

If you have a product with tight margins or need to defend them, it might be time for an adjustment in your compensation plan.

You can offer incentives to your salespeople based on how much profit they bring in, rather than their total revenue.

If you sell for 30% of the cost and your salesperson gives 15% discounts, it will take 2 deals to match what one deal would be worth at full price.

When commission is based on profit, a 15% discount only costs them half their commissions. But when it’s revenue-based, the full amount of the discount goes to take away from what they make.

If you design a compensation plan that is aligned with the profit line, your team will be incentivized to defend it instead of just focusing on revenue.

The goal of a compensation plan is to align with your business. This doesn’t mean you should change how much reps are paid, but rewarding the most productive members can help keep them motivated and sales high.

Recruit New Available Talent

When you’re looking for new talent, remember that it’s a buyers market. You can find someone who will fill your team’s weak link with their strengths. Also, don’t foget on how to successfully cut.

It’s hard to hire great sales talent when the economy is good, but right now there are a lot of people who would love to work for your company.

If you need to let someone go, don’t forget that there are talented and eager people out there who would love the opportunity.

Instead of replacing the reps you fired with new hires, look for cheaper employees who can bring in more revenue.

If you’re looking for a salesperson, be specific about the criteria they need to meet. Qualifying them based on what you want is also important – it shows that prospective employees know how to do their job.

The most important traits for a salesperson are the ability to handle objections, negotiate and close deals.

With remote work, you need to rethink your onboarding process.

I used to be able to teach new hires what they need in the office, but now I have them go through an entire onboarding program before they’re let loose on their own.

The better your onboarding, the faster a new hire will get up to speed and bring in revenue.

This Is a Time of Opportunity

It’s not easy being a VP of Sales, especially on how to successfully cut, but it does present new opportunities for growth.

Using new strategies to adapt with the changing industry and economy will help your team not only survive, but thrive.


Need Help Automating Your Sales Prospecting Process?

LeadFuze gives you all the data you need to find ideal leads, including full contact information.

Go through a variety of filters to zero in on the leads you want to reach. This is crazy specific, but you could find all the people that match the following: 

  • A company in the Financial Services or Banking industry
  • Who have more than 10 employees
  • That spend money on Adwords
  • Who use Hubspot
  • Who currently have job openings for marketing help
  • With the role of HR Manager
  • That has only been in this role for less than 1 year
Just to give you an idea. 😀
Editors Note:

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Justin McGill
About Author: Justin McGill
This post was generated for LeadFuze and attributed to Justin McGill, the Founder of LeadFuze.