The news this week tells a familiar story Jaguar Land Rover just announced they are cutting up to 4,000 jobs over the next two years. They need to save £1.7bn. The combination of tariffs, a cyber attack, and a profit slump forced the decision. When large companies cut, small businesses feel it too. Contracts dry up. Clients get cautious. And suddenly you are looking at your own numbers wondering what you can afford to keep. I have watched people in this position make two kinds of mistakes. The first is cutting nothing and hoping things improve. The second is cutting fast and indiscriminately, then spending the next eighteen months rebuilding what they accidentally destroyed. Neither works. There is a better way. Most cost cuts are made in panic When revenue drops, the instinct is to slash whatever is easiest. Marketing budgets go first because they feel optional. Training disappears. That contractor who handles overflow work gets let go. The problem is that these cuts are rarely strategic. They are emotional. You are not thinking about what drives revenue. You are thinking about what feels expendable right now. I worked with someone last year who cut their entire marketing spend when a major client left. Six months later, their pipeline was empty. They had saved £2,400 a month and lost £180,000 in potential business. The maths did not work. Separate the vital from the visible Here is the distinction that matters: some costs are visible and some are vital. They are not the same thing. Visible costs are the ones that show up obviously on your bank statement. Software subscriptions. Office snacks. The designer you use occasionally. These feel like easy targets. Vital costs are the ones that actually produce revenue or protect it. Sometimes they overlap with visible costs. Often they do not. The question to ask about every expense is not "can we survive without this?" but "what happens to revenue if we remove this?" If the answer is nothing, cut it. If the answer is unclear, you need to find out before you decide. The 40% rule I use with clients When someone comes to me needing to cut costs, I start with a simple framework. Take your total monthly expenses and sort them into three buckets. The first bucket is revenue-generating. These are costs that directly produce income. Sales tools. Marketing that converts. Staff who bill clients. The second bucket is revenue-protecting. These costs do not generate income directly but losing them would damage your ability to earn. Insurance. Key software. Your accountant. The third bucket is everything else. Nice to have. Comfortable. But not connected to money coming in or staying. In most small businesses I have analysed through alira.london, that third bucket contains 30 to 40 percent of total spend. Not always. But often enough that it is worth checking. Cut from the third bucket first. Cut deeply there before you touch the first two. Timing matters more than you think The other mistake I see constantly is waiting too long. People know things are getting tight in January but do not act until April, when they are already behind on payments. By then, you are cutting from panic. You do not have time to think. You just need cash. If you suspect you will need to reduce costs in six months, start planning now. Run the numbers. Identify what you would cut first, second, third. Have a staged plan ready. The businesses that survive downturns are not necessarily the ones with the most cash. They are the ones who acted early enough to have options. What to keep at all costs There are a few categories I tell people to protect unless they are genuinely about to close. First, anything that generates leads or sales. If you are spending £500 a month on ads that bring in £3,000 in business, that is not a cost. That is an investment with a 6x return. Cutting it is not saving money. It is losing money. Second, people who know how your business actually works. Institutional knowledge is expensive to replace. When you let someone go who has been with you for three years, you are not just losing their salary. You are losing everything they know about your clients, your systems, your quirks. Third, anything that keeps you legal or solvent. Accountants. Insurance. Compliance costs. These feel like overhead until you need them. The cuts that pay for themselves Some cuts actually improve your business. Subscriptions you forgot you had. Tools that duplicate each other. Meetings that could be emails. Reports nobody reads. I spent an afternoon last month going through a client's software stack. They were paying for three different project management tools because different team members had signed up at different times. Nobody knew. That was £340 a month, gone. These are the cuts that feel good. You are not sacrificing anything. You are just stopping waste. Before you cut anything that matters, make sure you have found everything that does not. What to do this week Pull your last three months of bank statements and categorise every expense into the three buckets: revenue-generating, revenue-protecting, and everything else. Be honest about which bucket each item belongs in. Identify the largest item in your "everything else" bucket. Decide this week whether to cut it, reduce it, or justify keeping it. If you cannot justify it in one sentence, cut it. Set a calendar reminder for 90 days from now to review your costs again. Do not wait until you are forced to. Build the habit of looking before you have to.