When runway shrinks, founders face the same question: where do we cut? Making random cuts across all departments rarely works. A department-level analysis shows you where cost reduction has the least growth impact.
Step 1: Map burn by department
Before cutting, understand your current burn composition. For most Series A–B SaaS: - Engineering: 40–50% of headcount cost - Sales: 20–30% - Marketing: 10–20% - G&A: 10–15%
Step 2: Apply the ROI filter
Not all departments have equal ROI. Ask for each: what revenue or product output does this cost generate, and on what timeline?
Sales and marketing: high ROI if CAC payback < 18 months; cut demand gen before account executives. Engineering: rarely the right first cut unless you have product/market fit and are in pure monetisation mode. G&A: typically first to cut — contractors, software subscriptions, office costs.
Step 3: Cut to extend, not to survive
The goal of burn optimisation is to extend runway until your next value-creation milestone (ARR target, product launch, breakeven). Define the milestone first. Then cut to reach it with 3+ months buffer.
Benchmark: healthy burn multiples by stage
| Stage | Target burn multiple |
|---|---|
| Pre-revenue | N/A |
| $0–1M ARR | 2–4× |
| $1–5M ARR | 1.5–2.5× |
| $5M+ ARR | <1.5× |
Burn multiple = net burn / net new ARR added. <1× is world-class efficiency.
Use the cash burn by department calculator to model your current burn composition and runway.