When Sequoia Capital told their portfolio companies earlier this year that they needed to make dramatic cuts to their business plan, they apparently weren’t screwing around. Today tech blog GigaOm has a round-up of what’s gone down at SC’s portfolio start-ups since the announcement was made last fall. It can be neatly summed up in one word: layoffs. Lots of them. Since that October meeting, twenty of their portfolio businesses have laid off more than 500 employees. Online shoe seller Zappos made the most dramatic cuts, axing 128 members of their staff. For their part, Sequoia says they haven’t changed their stance regarding the importance of making cuts in this economic environment.
So, what’s all this mean for an entrepreneur working on a business plan? Believe it or not, there is some relevance—particularly if you’re seeking funding. The take-home message is that you should keep your payroll as lean as possible. Figure out exactly how many employees you need to sufficiently operate your business—and be realistic—and don’t go over that amount no matter who tries to convince you that you need an in-house accountant or an extra receptionist. Not only will that demonstrate to investors that you get it, but it’ll also help you have a more realistic picture of what your nascent start-up will really look like. While it’s always been true that start-ups should strive to be as lean as possible, this is particularly true now.
Can I just say that this sign is very eerie.
Keeping lean is definitely good for start-ups.
I guess the “good news” will be that the companies that survive this economic environment will be ready to hire again at mid-year.
Lets start a vote on what kind of business this is by the picture. Water treatment plant?