A Founder’s Guide to Cutting Burn

By Mariah Chase, fmr. ELOQUII CEO

Female Founders Fund
Female Founders Fund
6 min readOct 16, 2023

Image credit: Shopify

You’ve been told by your investors, your board, fellow founders, advisors — maybe even your yoga teacher — to cut your company’s burn. (If you had a nickel for each time you’ve been told to cut burn, you wouldn’t actually need to do it anymore!)

This ‘cost cutting’ chorus is due to the Fed’s swift rate hikes in response to inflation and the fact that the “easy money” of 2021/2022 is over. (You’re reading this so I’m assuming you’re all too aware.) Many investors overallocated at inflated valuations and are worried about their fund’s markdowns as well as their ability to raise their next fund. If you need capital, there is a very high likelihood that your round will stall, be underfunded or never get off the ground. According to Chamath Palihapitiya on episode #146 of the All-In podcast, you may also need a longer runway than initially forecasted at the outset of the rate hikes: “I told my CEOs, guys, let’s get enough cash to last through the middle of (20)25… I was pretty clear about that to folks. I mean, get to default alive. I think that that was wrong. I think now you gotta be Q1 of ‘26… maybe even mid ‘26.”

When I advise CEOs and founders on reducing costs, we’re focused on buying their companies’ enough time (to earn the right) to fight and win. That’s it. As CEO of ELOQUII, a plus sized apparel brand, for 9 years, I raised $40M in venture capital and sold to Walmart in 2018. During those years, I raised money, spent money, and then… I cut. A lot. (Post mortem — spending is way better). I, along with an incredible team, cut spending because we needed cash and more importantly, because it was the right thing to do for the business. We needed to shift from a ‘growth at all costs to raise your next round’ mindset to one of sustainability. The business became healthier as we eschewed top line growth in favor of margin dollars and we operated with more strategic clarity. (And even then (!), we still did too much and pursued too many initiatives.)

Here are the 5 actions I recommend to cut costs and extend runway:

People

Headcount is usually a large chunk of your company’s G&A. If you need to extend runway and you haven’t yet materially reduced headcount, you need to. When I was CEO of ELOQUII, we did two rounds of layoffs, ultimately cutting over 30% of corporate headcount roles and a greater proportion of headcount dollars. No position was off limits. While necessary from a P&L standpoint, it was terrible to go through.

There’s no sugarcoating what a crap time it is for everyone — the people impacted, the remaining associates, and you. A few specific things that I learned:

  1. When thinking about the who in a RIF (reduction in force), be clear about your company’s top 2–3 strategic priorities and ruthlessly align your org chart to those priorities.
  2. Be extremely organized and prepared for the day before, the day of and the day after. Have a TAP (time and action plan) that begins and ends well before and after the actual RIF. All stakeholders should follow that TAP to the minute because the more organized you are, the calmer and smoother the entire process is — for everyone.
  3. Tick and tie your comms and talk through them with your leadership team well in advance.
  4. Gather teams immediately after the action and spend the next days and weeks communicating, listening, and taking steps to rebuild, ensuring everyone understands how to navigate the strategic path forward.
  5. If your company is big enough to have a Head of People, rely on them and learn from them. Our Head of People was my rock.
  6. Take a deep breath and some Advil.

Inventory Forecasting

ELOQUII’s largest cost was inventory. Inventory! I know! Such a vile concept. I fought our board to pay more attention to it because without the right product, in the right quantity at the right price at the right time, we were lighting marketing $$ on fire. Said another way, if we had the right inventory, our marketing $$ could be extremely productive. So, if you are one of the lucky ones to run an inventory business, distort resources towards ensuring you have a healthy line of credit and find ways to predict your inventory — the what, when and how much of. We created a relatively simple waitlist feature that helped us predict quantities of initial item orders as well as reorders, architect pricing to exceed margin goals and drive excitement and conversion when an item came (back) into stock. This simple product saved and made us millions. If you have inventory, find ways to predict your needs to reduce markdowns and sell-offs and make your marketing spend as efficient as possible.

Renegotiate

We had some lean — as in, can we make payroll — times at ELOQUII and we had to be scrappy. We started renegotiating contracts on an annual basis, trying to find levers to either extend the terms, the contract length for a cost break, or break up early without penalty if warranted. We started to negotiate new contracts with flexibility in mind. Everytime we did this exercise, leadership would review the entire service provider list and go one by one, trying to find $$ wherever we could. This tactic consistently saved us $$ and realigned our business partnerships to our business strategy. As an aside, I don’t think any of our service providers think of me or ELOQUII with a smile or fond memory, but it was a valuable lesson that business relationships shouldn’t be static.

Know your numbers

This one’s really simple — know your company’s KPIs, revenue, costs and cash, both today and tomorrow. This means forecasting accurately. For that to happen, you need to forecast often. We re-forecasted our fiscal year financials every other week, examining all variances from budget and determining where we needed to cut, hold back or spend based on our KPI goals. Moreover, hold yourself and team members accountable for their budgets. I was definitely the “queen of no” when colleagues would ask if they could go over budget for xyz reason. The answer was almost always “no, and can we find another way?” There were times when analysis showed a clear ROI to spending more, but in the absence of that, I found it hard to justify. (That said, buy snacks and good chairs for the office. I fought these items for a while and it was definitely penny wise, pound foolish. Sorry team!)

Marketing

Relax, I didn’t forget about everyone’s favorite topic — not a chance! ELOQUII was a classic DTC marketing story — we spent A LOT on acquisition marketing. We had the spaghetti curves, cohort analyses and a relatively sophisticated buyer model that we used to do bottoms up financial planning. All of it seemed requisite for a venture-backed DTC business. Ultimately, we spent way too much time focused on those metrics and spent too much on marketing for too long. We had outstanding customer retention and could have likely afforded to take our foot off the acquisition gas pedal in favor of incremental retention $$ earlier.

By the time I left the business at the end of last year, we had gone from a ‘significant’ double digit marketing spend rate to single digits. Growth slowed a little bit, but the trade off was financially worthwhile and we learned that our business was often more sensitive to the vagaries of the economy, namely our current and prospective customers’ ability to spend on discretionary items. If customers didn’t have discretionary dollars to spend with us, see above re: torching marketing $$. If your business is too early stage to have a meaningful customer database to leverage, try putting conservative marketing dollars towards earned media and create your own stories to amplify.

In closing…

For those of you reading this and faced with the task of extending your company’s runway — maybe for the second or third time — I feel you. I really do. It’s counterintuitive to cut something you’re supposed to be building. That said, the other path is not an option and this is sometimes what’s required as a leader. So for those founders worried that cutting burn means you won’t be able to run your business, what I hope you take away from my experience at ELOQUII is that it’s possible — and necessary — to do both.

Mariah Chase was the CEO of ELOQUII — an FFF portfolio company that was acquired by Walmart in October 2018 — from 2013 to 2022. The company launched in 2014 and very much defined a new category of fashion for the plus-size woman who represents 70% of American women. Mariah’s company prior to ELOQUII was Send The Trend which was acquired by QVC. Today, Mariah advises CEOs and founders and invests.

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Published in Female Founders Fund

News about female founders and women in VC from a seed-stage fund that invests in the exponential power of exceptional female talent.

Written by Female Founders Fund

An early-stage fund investing in the exponential power of exceptional female talent.

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