Here Comes The Drip, Drip, Drip of Headcount Reduction Announcements
Consumer Tech is a tough place to operate these days given the difficult macro backdrop. Last week it was Spotify that announced a 17% headcount reduction. Today it is Etsy that announced it will cut 11% of its Marketplace workforce. I expect more of the same from other Consumer-facing Technology companies in January.
Time to trim positions in richly-valued Technology companies. Earnings will not improve in 2024, rather, EPS growth will decline. Analysts touting EPS growth rate acceleration for Technology as a whole in 2024 need to have their heads examined.
The sad truth is that most companies that have cut heads this year operated with too much fat to begin with. The compassionate thing to do is to not make a new hire until it is abundantly clear that the company in question is operating at peak efficiency. It is the lazy man’s approach to think that the only way to grow Revenue is to throw more capital and people at the Sales & Marketing operation, or that the only way to churn out more product is to hire more product managers, engineers and architects. First benchmark your company’s operations against best-in-class organizations to get a sense for where you stand. For example, what type of Revenue and EBITDA does your firm generate per employee and how does that compare to every other company in the peer group?