May 11, 2026

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Hi Everyone,

If your company is tightening budgets right now, you're probably looking at where the money goes and asking what to cut. The instinct is to start with the highest costs first.

But cutting the wrong things first can cost you far more than you saved. Some cuts are easy to reverse and barely register with your team. Others take years to recover from.

Here's how to tell the difference before you decide.

Sort your cuts before you make them

Think about each cost decision in terms of three things: how hard it is to reverse, how your team will react, and how it will impact the execution of your strategy.

Every planned cut belongs in one of the following categories.

Safe cuts (start here)

These are large, reversible, and culturally neutral. They often build trust by showing financial discipline.

SaaS license waste is the clearest example. Zylo's 2024 SaaS Management Index found that 49% of software licenses companies pay for go unused. A license audit will often surface thousands in savings without affecting anyone's job.

Vendor renegotiation is another. Vendr's data shows an average 16.5% discount on renegotiated SaaS contracts. Downsizing office space in hybrid setups and tightening travel policies belong here, too.

37signals moved its cloud infrastructure off AWS and cut its annual bill from $3.2M to under $1M. As co-founder David Heinemeier Hansson has said, profitable companies are stable companies, and stability protects morale, quality, and focus.

Work through all of these before you touch anything in the next two categories.

Conditional cuts (only with clear reasoning)

These include reworking bonuses, folding roles together, and trimming newer perks like wellness budgets or tuition help. Your team will notice, and they'll pay attention to how fairly you handle it.

If you're changing a bonus program, explain what triggered the decision and how it was applied. A company-wide email won't be enough – your managers need to walk their teams through it in 1:1s.

Whether these cuts create resentment or acceptance almost always comes down to communication and whether people feel the process was fair.

Sacred cuts (last resort only)

Healthcare quality, retirement matching, parental leave, learning budgets, and hybrid or remote flexibility. These take 12 to 24 months to rebuild once they're gone.

​Webflow cut about 8% of staff in mid-2024 and reduced healthcare coverage around the same time. Employees posted a wave of negative Glassdoor reviews, using the words "blindsided" and "betrayed" repeatedly, and the company's employer brand took a hit that's still visible today.

Glassdoor has found that after layoffs, ratings from employees who kept their jobs drop within days and take more than 32 months to fully recover. Removing benefits people rely on does more lasting damage than letting people go with transparency and fair severance.

Try this today

Pull your last three months of software bills and flag every tool where fewer than half the paid accounts are actually being used. That's your safe-cuts list.

Bring it to your next leadership meeting with a rough estimate of annual savings. It gives your team real evidence that you can cut costs without touching jobs or benefits.

Go deeper

👉 Glassdoor: Layoffs Cast a Long Shadow – the most detailed recent research on what happens to survivor engagement, ratings, and voluntary turnover after cost cuts

👉 Harvard Business Review: Layoffs That Don't Break Your Company – Sandra Sucher's framework for managing workforce changes without destroying what you've built

👉 37signals: Our Cloud Exit – the full case study of how 37signals eliminated $2M in annual cloud costs without layoffs or benefit cuts

👉 Harvard Business Review: 6 Mistakes Leaders Make When Announcing Layoffs – guidance on communication sequencing and what to avoid

Coming up tomorrow

Tomorrow we're covering why most companies collect customer feedback but barely act on it, and a system to fix that.

That's it for today! Have a great week.

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P.S. Have you ever seen a cost cut backfire? Forward this to a founder or CEO who's weighing cuts right now.