CEO Cost Cuts: reduce business costs without hurting growth
- Aug 3
- 9 min read
Profit is under pressure as buyer confidence is dropping off, with no magic wand in sight! As a CEO your board now wants savings reflected in the next forecast, a perfectly reasonable request, you worry another round of blunt-force cuts will likely be damaging.
Not every dollar of expenditure can be removed with the same consequence.
Some costs are genuine waste, while others support the sales capacity, customer service and operational capability the business depends on to protect revenue.
A business-wide cost reduction may improve next month’s result, but it can also leave the business less able to win work, serve customers and deliver reliably over the following year - the immediate numbers look better, but the business becomes less capable of holding course.
First I check we know what is going on...
A weaker profit margin is not always caused by excessive overhead. It may be the result of underpricing, falling sales volume, uncontrolled scope, poor customer mix, delivery overruns or a service line that no longer earns enough to justify the effort.
These are harder issues because they require leadership to make a commercial decision, rather than simply asking various departments to spend less. These are also where the most significant improvement may be available.
Before approving broad reductions, I would expect the CEO and board to be clear about:
What is actually driving the weaker result?
Which changes are temporary, and which are likely to continue?
Which customers, services or locations are contributing too little profit?
Whether sales, pricing or delivery assumptions need to change?
What cost reductions are recurring, and what spending is merely being delayed?
What effect each proposed action will have on cash as well as reported profit?
If management cannot explain the cause of the pressure, it is too early to assume a general cost reduction is the right response.
Start with the goal - a savings target is not necessarily a cost reduction plan.
Cutting costs is easy. Cutting the right costs takes experience
When a board asks management to reduce costs by a specific amount, the target can quickly become the strategy.... Each department is asked to find five or ten per cent, vacant roles are frozen, subscriptions are cancelled and discretionary spending stops until the required total has been reached.
This blunt-force % cut is a quick and easy to measure, and it assumes:
every part of the organisation has the same level of waste and that
every reduction creates the same commercial consequence
neither assumption is likely to be true.
One team may have duplicated systems, poorly negotiated supplier contracts and reporting work that nobody uses.
But, another may already be stretched and carrying the customer relationships, operational knowledge or service capability that protects revenue.
In best case scenarios the leadership team separate proposed reductions into four groups before presenting them to the board:
Which spending is genuine waste and can be stopped without creating another cost elsewhere?
Which costs can be reduced through better purchasing, tighter scope or changed timing?
Which costs support revenue, customers, delivery, compliance or essential capability?
Which spending should be redirected into a stronger commercial return rather than simply removed?
The board still needs a clear savings figure, but it also needs to understand what is being reduced, when the benefit will appear and what consequence the organisation is accepting in return.
Tackle hidden costs, that are often less obvious.
Are all the customers equally profitable?
The profit and loss statement shows where expenditure has been recorded, but it does not automatically show which customers, products, contracts or services created the workload behind that expenditure.
This is where cost-to-serve becomes useful. It looks beyond the direct cost of delivering a product or service and considers the additional work required to win the customer, manage the relationship, meet special requirements, correct errors, issue invoices and collect payment.
A customer may produce healthy revenue but require repeated scope changes, senior management involvement, additional reporting and extended payment terms. A service may appear profitable until rework, customer support and delivery overruns are included properly.
In that situation, cutting a general overhead cost may make little difference because the underlying commercial arrangement has not changed. Management may need to revise the price, tighten the scope, change the service model or stop providing work that was never properly charged.
Before cutting elsewhere, I would want clear answers to questions such as:
Which customers and services contribute enough profit after the full delivery workload is included?
Where has the amount of work increased without a corresponding price change?
Which contracts include obligations that are expensive to meet but difficult to charge for?
Are slow-paying customers also consuming disproportionate management time?
Is the business maintaining low-profit work because the revenue figure looks reassuring?
This is not an argument for removing every lower-profit customer or service. It is an argument for understanding what the business is actually earning before cutting the resources used to deliver it.
Where the answer is not clear, stronger pricing decision support may be more commercially useful than another general reduction in overhead.
Are the systems being used to their best capacity?
Software subscriptions are usually one of the first areas reviewed because the expenditure is visible and cancellation can appear straightforward. There are often worthwhile savings available, particularly where different teams have purchased overlapping tools or licences remain assigned to people who no longer use them.
However, an underused system is not always an unnecessary system. It may have been poorly implemented, introduced without sufficient training or added without changing the manual process it was meant to replace.
Cancelling the subscription without understanding the work it performs can move the cost back into spreadsheets, email, duplicated data entry and staff time. The invoice disappears, but the workload remains.
A useful software review should therefore consider:
Are we paying for more licences, storage or functionality than we use?
Are several systems performing substantially the same function?
Has the system replaced the work it was intended to replace?
What manual activity will return if it is cancelled?
Would better implementation of one platform allow two or three others to be removed?
Who owns the renewal decision and reviews usage before the contract rolls forward?
The aim is not to protect every system because someone once approved it. It is to distinguish genuine duplication from the technology the organisation needs to operate efficiently.
Right work : right role
People costs are normally among the largest expenses in an organisation, which makes them an obvious focus when profit is under pressure. They are also where a rushed decision can create the greatest operational damage.
Before removing a role, I would examine the work sitting inside it. Employees may be producing reports nobody uses, re-entering information between systems, attending meetings that make no decision or correcting errors created by an unclear process elsewhere.
That work should be challenged first.
A vacancy freeze may still be appropriate, and there may be roles that need to change or positions the organisation can no longer afford. The decision should nevertheless be based on the capability the business will lose, not merely the salary it will save.
Management should be able to explain:
What work will stop when the role is removed?
What work will move to someone else, and does that person have capacity?
Will customer response times, delivery quality or revenue generation be affected?
Is the saving reduced by redundancy costs, contractor support or lower productivity elsewhere?
Are senior people already absorbing administration that should be simplified or delegated?
Will the organisation need to recruit the capability again when demand improves?
The same financial discipline used before adding another salary should be applied before removing one. In both cases, the decision affects cash, workload, delivery capacity and the organisation’s ability to produce revenue.
A good cost review is closer to careful pruning than demolition. It removes what no longer contributes while protecting the capability the organisation still needs.
Where can time be saved?
Some of the most persistent waste in an organisation does not appear as an obvious line in the accounts. It sits inside paid time.
A weekly meeting attended by ten people, a board report that takes several days to assemble, repeated approvals for minor purchases and information entered into two different systems all carry a cost. They also slow decisions and leave less time for customers, delivery and management.
I would ask each leadership team to identify work that could stop for a month without creating a meaningful consequence. This often produces a more useful discussion than asking each manager to nominate a percentage reduction.
Questions worth asking include:
Which reports are still being prepared because they have always been prepared?
Which meetings could be shorter, less frequent or removed entirely?
Where is the same information entered, checked or approved more than once?
Which recurring tasks produce no decision, customer outcome or compliance benefit?
Where are senior employees doing administrative work because the process has never been redesigned?
This is not about expecting fewer people to carry an unreasonable workload. It is about removing low-value activity so that the organisation can see the workload it genuinely needs to support.
Procurement should improve value, not simply lower the quoted price
Supplier reviews can produce genuine savings, particularly where contracts have rolled forward without competition, purchasing is spread across several teams or the organisation is paying for service levels it no longer needs.
The discussion should extend beyond the quoted rate. Payment terms, minimum commitments, annual increases, service reliability, implementation effort and exit costs can materially change the result.
A cheaper supplier may be a sensible choice, but not if unreliable delivery creates customer complaints, staff rework or interrupted service. Similarly, a supplier that will not reduce its price may still offer better payment terms, remove unused features or consolidate services currently purchased separately.
For each material supplier, management should understand:
What are we buying, and is the current volume still required?
Are several teams buying similar products or services independently?
When was the contract last tested against the market?
What will it cost to change suppliers?
What operational risk increases if service quality falls?
Can the scope, payment terms or contract structure be improved even if the rate does not change?
A procurement saving is only useful when the net commercial result is better.
Some money should be redirected, not removed
A disciplined review will usually identify expenditure that should stop completely, spending that can be reduced and resources that should move into work with a stronger return.
Savings from duplicated systems might fund proper implementation of the remaining platform. Reduced spending on low-value administration might support automation, customer retention or a more reliable sales process. Resources released from an unprofitable service line might strengthen an area where demand and profit are more sustainable.
This does not mean every dollar saved should be spent somewhere else. It means cost reduction and resource allocation should be considered together.
The question is not only, “What can we remove?” A seasoned CEO should also ask, “What does the business need more of if it is going to produce a stronger result?”
Put the timing and trade-offs into the forecast
A list of annualised savings can look persuasive while saying very little about the next six months. In the longer term the business may face redundancy payments, contract exit fees, implementation costs or a delay before the benefit reaches cash.
Each material proposal should be reflected in the rolling forecast, with the timing of the saving, any one-off cost and the expected effect on revenue, delivery and working capital made visible.
For each proposed action, the board paper should show:
The cost being reduced and the reason it is no longer required.
The date the saving is expected to begin.
Any redundancy, exit, implementation or transition cost.
The effect on revenue, customers, service delivery and risk.
Whether the saving is permanent, temporary or simply delayed.
Whether the money will be retained as cash or redirected elsewhere.
What management will monitor after the change.
This allows the board to distinguish a genuine structural saving from an action that improves one reporting period while creating pressure in the next.
This is where Fractional CFO support can help, by separating genuine waste from the people, systems and capability that protect revenue before the savings target is built into the forecast.
TLDR: The first result is not the only result
A good cost re-assessment should improve financial performance without leaving the organisation less capable of serving customers, supporting employees or responding when demand returns.
Start by cutting duplicated tools, removing low-value activity and re-negotiating weak supplier arrangements. Challenge customers, contracts and services that consume more than they return, and stop asking capable employees to carry work that should have been redesigned years ago.
At the same time, protect the systems, people and operational capability that allow the business to generate revenue and deliver what it has promised. The immediate saving matters, but so does the business that remains after it has been made.
If you are working in cost cutting uncertainty, an introductory financial clarity call is designed to help identify what needs attention first.
You can also use the contact form to outline the contract cash pressure your CEO, board or finance team is currently working through, or visit How Things Happen to understand how the first conversation works.
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