Entrepreneurs have to make some tough decisions this Holiday season, amid the worst recession we’ve probably ever seen. If we cut back too far, we’re going to lose valuable employees, and when the economy comes back around, it may take us an extended period of time to ramp back up.

However, if we don’t cut-back, the company could suffer, and there may not be any business at all.

So what is an entrepreneur to do? How can we cut costs, effectively?

7 Easy Cost Cutting Measures

The President-elect has told us we need to be prepared to living lives of efficiency. Recycling, reusing, and re-inventing ourselves is the motto of the 21st century.

Instead of layoffs, employers are looking for ways to keep the company intact, employees happy, and business expanding. Hopefully these examples below will help you in your business.

4 Day Workweeks
This can be a real blessing for parents struggling with daycare. Plus, who wouldn’t like to work less than they do now. This shaves 52 days off your payroll, and can make your employees happy as well.

Extended Holiday Vacation
At the end of the year, not much work gets done on the 24th of December and on New Years Day. If you don’t already, give your employees these days off as an un-paid vacation.

Spring Break
Unpaid vacation sounds really menacing until you get to take off for 1 week in the middle of May. Finding creative ways to give your employees time off can help assuage the negative thoughts surrounding unpaid vacation. These breaks will have your staff rested, and ready to come back to work.

Voluntary Salary Reductions
If you have every employee volunteer a 1% reduction in salary, it can save the company a large amount of money, and won’t cause a huge material affect on overall morale.

401k Matching Hiatus
Yes, retirement planning is important, but keeping employees paid is also a priority. Create a deal with your employees. Suspend 401k matching for 1 year, with a promise to restore payments at the end of the year.

Turn Off Your Computers
This is perhaps one of the most overlooked. Simply turning off computers and monitors everyday can save huge amounts on your electric bill. Configure the power settings to power-down all monitors, and PCs so you can have the process be automatic.

Eliminate Overtime
Paying 1 1/2 times salary for overtime work is typically an example of efficiency that can be improved. Eliminate overtime, let employees go home early, and you’ll get more productive employees that work 2x better when they’re not overworked.

Sure, employees are any company’s greatest expense, and also their greatest asset. I’m not suggesting that you are wasting your time, thus costing your company money, but rather that your company is not getting the most out of you, by not maximizing your efficiency.

So how much money is your company wasting?

Salary X Unused Time = FAIL!

Let’s say you make $50,000 a year. This would be a nice salary for anyone not in the Bay Area, and you work only a 40 hour work week.

That’s $960 per week or $24 per hour.

For a typical work-week, if your company was able to get 5 more hours of productivity out of you, they would make:

5 x $24 per hour = $115 per week

$5,980 per year

You Gotta Spend Money to Save Money

So if we can get 5 more hours of productivity out of our employees, we can save our company $6,000 per year. If you have a company of 20 people, that’s $120,000 per year, which is quite a nice cost-savings.

During a downturn in the economy, it’s small steps like these that help the good companies survive and the weak fail, and when the economy starts turning around, these strong companies can now flourish.

So Where Can We Find These 5 Hours?

Dual-monitors are proven by Microsoft to be one of the best ways to improve your productivity.

If you assume you’ll spend $1,000 on dual-monitor setups for your employees, you can easily pay for this capital expense in about 2 1/2 months, plus it’ll make your employees a lot happier.

Let us know any tips you have for improving employee productivity.

Pretty impressive track record, eh? Along with a number of other VCs, including the Sequoia group, John Doerr has put together 10 ways to “not lose your shirt,” in this economy.

It would heed you to take his advice.

Top 10 Tips For Entrepreneurs In This Economy

1. Act now
2. Protect vital core of business (surgical cuts, not axe)
3. Get 18 months or more of cash
4. Defer unnecessary expenses (swanky new office, Microsoft Windows) and be tightwad on capex. Re-prioritize all R&D. You now can’t afford to do it all.
5. Negotiate. In this climate, everything is negotiable. Including existing contracts, terms.
6. Everyone in company should be selling, even receptionist. (This is not just about expenses, need to grow revenue).
7. Swap cash bonuses and salaries for equity.
8. Pay attention to where your cash is. (Treasuries, not money markets).
9. Look 90 days ahead and assess revenue. If not there, reset plan.
10. Overcommunicate: With employees, investors, key customers. Let them know your resolve. Don’t sugarcoat the situation we’re in.

http://www.alleyinsider.com/2008/10/john-doerr-ten-ways-not-to-lose-your-shirt

It was a great explanation for those people who don’t know quite what happened.

It’s a real quick presentation, takes about 30 seconds to click-through and I think is a great example of using new technologies, like SlideShare to help educate and inform the masses.

As far as mass emails go, there was a study published recently that said for all the time teens spend on social networks, email marketing is still much more effective.

The Credit Crisis Explained

Princeton, Ind. — For years, Detroit’s Big Three car makers have paid their workers even when they aren’t needed on the assembly line.

This year, as the industry’s downturn intensifies, Toyota Motor Corp. finds itself doing the same thing.

Detroit Is Being Out-Worked

Stalwart Americans love to pride themselves on their work ethic. Americans won World War II because of their great work ethic. Americans defeated communism with their capitalist work-ethic.

So why are these same Americans sitting idly on their jobs? It’s been notorious the GM plants that pay employees to sit on their asses. When production gets cut, the assembly lines stop, and employees play cards, get paid, and do no work.

Suddenly Toyota finds itself in the same position as Detroit. Consumer demand is shrinking, and workers have nothing to do.

Toyota Is More Efficient, And Thus Wins

Faced with workers getting paid to do nothing, Toyota looked to a better alternative.

Toyota is using the down time to hone its workers’ quality-control and productivity skills. The company has pledged never to lay off any of its full-time employees, who are nonunion.

Jim Lentz, president of Toyota Motor Sales, the company’s U.S. sales unit, said the company believes keeping employees on the payroll and using the time to improve their capabilities is the best move in the long run. “It would have been crazy for us to lose people for 90 days and [then] to rehire and retrain people and hope that we have a smooth ramp-up coming back in,” Mr. Lentz said.

When Life Gives You Downtime, Be Productive

The Toyota automakers definitely could have looked at the recession, and told their employees they can take time off, and rest while the economy goes packing for the next 6 months.

Instead, they are capitalizing on the time-off, and making their workforce more efficient, whereas the old-time automakers let their workforce collect cash, while increasingly making them more inefficient.

So we should be glad Detroit is failing, as it’s only going to create more room for automakers like Toyota to gain more market share. Toyota promises never to lay off employees, and to train them so their skills don’t become obsolete. What more could you ask for?

They cautioned their portfolio companies that this may be the worst economic downturn that you or your company has ever experienced, so be prepared.

Words of Advice to Startups

Sequoia gave their companies some guidelines to help them through this time, because things are going to get rough:

Raising capital will be much more difficult now. You should lower your “burn rate” to raise at least 3-6 months or more of funding via cost reductions, even if it means staff reductions and reduced marketing and G&A expenses. This is the equivalent to “raising an internal round” through cost reductions to buy you more time until you need to raise money again; hopefully when fund raising is more feasible.

What Are You Doing?

Is your startup hitting a rut? Do you have enough cash on hand to make it through the downturn? How’s your burn-rate looking? Good luck, because we’re used to buckling down and it’s only going to be stepped up going forward.

This country is horrible out of shape, and in bad health. Health care costs are well known to be one of the biggest risks facing this nation as Baby Boomers retire and our children continue to get fatter and fatter. What’s the solution? Well it’s not a simple one, but it’s a start: EAT LESS.

We’ve already seen what’s happened to our beloved Hummers, GM has tried unsuccessfully to sell them to an Indian company, but food is still an issue Americans having quite come to cope with.

Food Makers Have a Huge Opportunity

Food manufacturers should take up this cause and take a proactive step. They can setup a massive PR campaign championing healthy living, healthy eating, and then create products that play into this niche. The key element being: less. Food costs are rising on double-digit levels, and manufacturers are trying to figure out how to deliver the same product with increasing costs.

Do we raise prices?

Do we reduce quantities or make the package smaller so the contents appear bigger?

The answer is: you make the packages smaller, the contents less, and tell the consumer about it!

100 calorie snack bags are exploding. I know we can barely keep them stocked in our pantry. They make a great snack to bring to work, to eat on the weekends, and it’s a great way to control your intake and feel like you’re actually eating less (just try not to eat 2 of them).

Less is More

Marketers should look at the growing trend here for health. People are willing to pay more for organic, natural foods. They’re also willing to pay more for foods that are considered, “healthy.” What’s healthier than eating less crap than you used to? Doritos, why don’t you make mini-snack sized pouches of chips? Claim they’re 100-calorie packs or workout snacks or part of the Weight Watchers line.

Thank You, Recession

Thanks to the recession people will be walking more, eating less, and spending more wisely. This country needs to learn to limit itself, and this recession is coming at the perfect time.

Why else are you thankful for the recession?

And now that we’ve got some pretty conclusive evidence we’re in a downturn, everyone is looking at what was the initial sign there were bad times to come so we can use this a historic evidence to help us predict the next downturn.

Back in July of last year, Amp’d Mobile announced they had blown through all their $360 million in capitol and have no more operating cash and will have to shut down. In efforts to create a competitive advantage, they had an interesting strategy that was poised to have them triumphing over the likes of Verizon, etc.:

The company’s founder chief executive, Peter Adderton, known for dashing in and out of Los Angeles with a helicopter, searched his business for bottlenecks to the company’s growth. The big one he found: Credit checks. While his company’s carrier partner, Verizon, checked customers’ credit to make sure they had enough cash to pay their bills within 30 days, Amp’d decided to relax the requirement to 90 days for its own network.

Amp’d Mobile was going after the same market as the subprime mortgage lenders were, and what do you know? They didn’t pay their bills and companies were left in Chapter 11. It’ll be interesting to see if the subprime mess went well beyond those people who were subprime loans and is affecting speculators, second-home owners, families taking home equity loanes, etc.

Any other companies in this space that have gone down in the past 2 years that might have been an indication of our impending doom?