Cost Cutting Strategies for CFOs During a Downturn

For CFOs and finance leaders at PE-backed companies, the instinct to cut hard when growth slows is understandable, but often wrong. Cost cutting strategies that work in a downturn are about making disciplined, sequenced decisions that preserve your ability to grow when conditions improve.

The CFOs in this conversation — Steve Isom at Bloomerang, Jessica Hamilton at ActiveProspect, and David Dolmanet at BryComm — run companies at different stages and in different industries, but they’ve landed on a shared operating principle: tighten what you can control, protect what drives long-term value, and don’t mistake activity for discipline.

Rising interest rates changed the math on capital allocation for almost every PE-backed company, and investors who once rewarded top-line growth above all else are now asking about profitability in the first conversation. That shift demands a new, more surgical framework for managing OpEx during downturns.

The core principle: cost discipline is about spending on the right things and being honest about the cost of cutting the wrong ones.

Cost Cutting Strategies Only Work If You Understand What You’re Cutting

The most common mistake in a cost-cutting exercise is treating all spending as equally discretionary. It isn’t. Some expenses have a delayed revenue impact that won’t show up for 12 to 18 months. Others are structural to the business and can’t be unwound quickly. The discipline is in separating these categories before you start cutting, not after.

Every cost reduction has a downstream consequence. The question is whether you’ve quantified it honestly before making the decision.

David Dolmanet framed this with a construction business lens: turning off a trade show saves $50,000 next month, but there’s a pipeline impact that lands a year and a half later. Most companies don’t model that second-order effect. They book the immediate savings and call it good.

“I can save fifty thousand dollars next month by not going to this trade show but let’s all agree there’s not a zero cost to that a year and a half from now.” — David Dolmanet

The same logic applies to software and tooling. Steve Isom described a vendor-by-vendor audit at Bloomerang that surfaced both underused tools and redundant ones — multiple project management platforms doing the same job across different departments.

Consolidating to a single vendor solved two problems at once: lower spend and better pricing from the consolidated contract. But the discipline wasn’t just cutting — it was asking whether each tool was critical and whether it was actually being used. Utilization plus ROI. Without both, you’re guessing.

A useful framework for sorting expenses before cutting:

• Immediate discretionary, low revenue impact: duplicate software licenses, low-utilization tools, benefits no one values. Cut first.
• Discretionary with delayed revenue impact: marketing spend, trade shows, demand generation. Cut carefully, model the downstream effect.
• Structural, high-retention impact: compensation, high-value benefits, career development programs. Protect unless the business fundamentally cannot sustain them.
• Strategic investments with long payback: product development, key hires, infrastructure. Pause or re-sequence rather than cut outright.

Scenario Planning Is the Only Way to Budget Now

A budget built on a single set of assumptions is a bet, not a plan. The companies that manage through downturns most effectively aren’t the ones with the most accurate forecasts. They’re the ones who’ve already decided what they’ll do when the forecast is wrong.

David Dolmanet described building three distinct scenarios into every budget cycle:

1. A steady-state baseline
2. An accelerated-growth upside
3. A meaningful revenue contraction.

The locked budget becomes the agreed-upon midline — not a ceiling on what’s possible or a floor on what’s protected. When an executive team comes forward with a new investment idea mid-year, the answer is: which scenario does this fit, and what does it displace?

“The first answer is never no. We just have to quantify and understand the impact that that has on the business and the priorities that we’ve set.” — David Dolmanet

Scenario planning doesn’t make decisions for you — it gives you a pre-agreed framework so decisions get made faster and with less organizational friction when conditions shift.

That matters because the speed of response often determines how much damage a downturn does. Companies that wait for a formal planning cycle to adjust are usually six months behind the curve by the time they act.

Steve Isom added a related point about demand signals: the macro headlines don’t tell you what’s happening in your specific business. Bloomerang monitored top-of-funnel metrics daily because their sales cycles are short enough that inbound signal reflects real-time demand. A company with multi-year enterprise contracts or construction delivery cycles reads the signals differently.

The principle — watch your own demand data, not just the macro narrative — applies everywhere. What’s happening in your pipeline right now is more useful than what Salesforce said about guidance.

The Rule of 40 is a Discipline Framework

The Rule of 40 has become the investor-facing benchmark for balancing growth and profitability: revenue growth rate plus EBITDA margin should equal or exceed 40. A company growing 40% ARR at break-even hits it. So does a company growing 30% with a 10% margin. The math is simple. The discipline it demands is not.

The Rule of 40 forces a conversation that most high-growth companies avoid: what is the actual cost of the next dollar of growth?

Jessica Hamilton described ActiveProspect targeting a Rule of 31 for the coming year — deliberately below 40, but with the decision made consciously rather than by default. They weren’t cutting to hit the number. They were setting a growth investment level they could defend to the board and sustain through a tighter funding environment.

“We have always kept that in mind because now when we’ve had to cut back on some of our investment initiatives a little bit we’re fine and we’re prepared.” — Jessica Hamilton

What’s changed is when this conversation happens. In prior fundraising cycles, profitability and free cash flow came up in conversation two or three of a Series B process. Now they come up in the first conversation. Investors are asking about the balance before they’ve established conviction on the product.

CFOs preparing for a raise need a credible Rule of 40 story — not a promise to reach it eventually, but a clear articulation of the tradeoff they’re making and why it’s the right one for this stage of the business.

Growth Rate	EBITDA Margin Required to Hit Rule of 40	What It Signals
50%+	Can run at a loss (negative margin acceptable)	High-growth, burn is justified
30–40%	Break-even to slight positive	Healthy balance, typical for growth-stage SaaS
20–30%	10–20% margin required	Efficiency matters as much as growth
Below 20%	Strong positive margin required	Profitability story must carry the valuation

Talent Is the Highest-Leverage Cost, Don’t Treat It Like a Line Item

Compensation is typically the largest single cost category for a software or services company. It’s also the hardest to cut without cascading consequences: lost institutional knowledge, depleted team morale, and a recruiting cycle that often costs more than the savings you generated. The CFOs in this conversation all landed on a version of the same answer: compete on culture and structure, not on matching every outside offer.

The most durable retention strategies cost less than the salary wars they replace. Jessica Hamilton made a deliberate choice not to match competing offers during the wage surge of 2021–2022. ActiveProspect lost people. But the company had succession plans in place, and the individuals who stayed were retained through flexibility and career development — not through competitive bidding. The highest-ranked items in their employee culture surveys weren’t compensation. They were flexibility and visible career growth paths.

Steve Isom described a similar approach to company culture spend: redirecting budget from low-impact perks — another t-shirt, another virtual happy hour — toward a high-signal giving program on Giving Tuesday. For roughly $30,000 across 300 employees, Bloomerang seeded individual charitable giving accounts and created a Slack channel where employees posted what they donated to and why. The ROI on that spending in team cohesion was disproportionate to the dollar amount.

On compensation structure, both Jessica and David flagged variable compensation as an increasingly important tool — and one that’s historically been reserved for senior leadership. Extending variable comp further down in the organization does two things: it manages base salary pressure in an inflationary environment, and it gives employees a tangible stake in company performance. When the company wins, they win. That’s a different conversation than “here’s your 4.5% merit increase.”

Questions worth asking before your next compensation cycle:

• Which employees are truly irreplaceable in the next 12 months — and are they being treated that way?
• What perks are you funding that employees don’t actually value? (Survey data often reveals surprising answers.)
• Where in the organization does variable compensation make sense beyond sales and senior leadership?
• Are your career ladders visible and specific enough that employees can see a path forward?
• Are you doing internal succession planning before defaulting to an external hire?

Higher Interest Rates Changed the Finance Function’s Job Description

When the cost of capital is near zero, a lot of financial decisions don’t require rigorous analysis. You invest, you grow, the math of terminal value absorbs the losses. When interest rates double — as they did for both Bloomerang and BryComm over the course of a single year — every financial decision is repriced in real time.

Rising interest rates don’t just increase your financing costs — they change the entire frame for capital allocation decisions across the business.

David Dolmanet described managing his line of credit balance far more tightly, accelerating his focus on DPO and DSO, and treating cash cycle management as a strategic priority rather than a treasury function.

None of that is radical, but it required a shift in how the whole organization thought about spending decisions when there’s a real cost to every dollar of debt drawn.

“When your cost of capital is near zero you don’t have to make those decisions in terms of time value of money… it puts a finer point on some of the decisions and some of the cost management.” — David Dolmanet

Steve Isom added that this education extends well beyond the finance team. Many executives — and certainly most individual contributors — built their entire careers during a period of near-zero interest rates. They don’t have an intuitive feel for how a rising discount rate collapses the present value of future cash flows, or why the math of a growth-at-all-costs strategy looks so different at 6% versus 1%.

Walking leadership teams through a simplified DCF exercise — what is this company actually worth under these assumptions? — turned out to be one of the most useful things the finance function could do to build organizational alignment around cost discipline.

The finance function’s job right now is partly analytical and partly educational. You’re not just modeling the numbers. You’re helping the rest of the executive team understand why the numbers changed and why the decisions they made without hesitation two years ago deserve much harder scrutiny today.

Get Finance Off Your Plate — and Back to Work on the Business

If your finance function is consuming leadership bandwidth, struggling to fill key roles, or producing financials too slowly to inform real decisions, the problem isn’t fixable by working harder. That’s exactly the kind of operational challenge — talent gaps, process debt, systems that don’t scale — that Consero was built to solve.

We provide AI-enabled finance operations that give PE-backed and growth-stage companies the visibility and control they need, without the overhead of building it all in-house. If you’re evaluating how to restructure your finance function heading into a tighter environment, let’s talk about what that could look like for your business.