Cutting costs at my company

We are in discussions with a potential buyer of our company at the moment. Unfortunately the final decision is not in our hands as all of our notable assets are now owned by some hedge fund guy who probably finds the however-many millions he spent on us to be like pocket change. I honestly don't know why he is spending as much time and money as he is, given the fact that at best he can make a couple million. I would think he would be better off focusing on bigger and better deals. But I'm not going to look gift horses in the mouth.

Anyway, this suitor wants to keep the development staff (what's left of it) but cut some costs. So I am thinking of what I would do if I was in their situation - picking up our assets and needing to cut costs. Of course I can't disclose any material information about the company for legal reasons, but here is a brief run through of our current costs:

• We have a large SAN data store that costs about $60k per month
• Our rent is about $40k per month for a huge 11k sq ft space, giving each employee approximately 1,000 sq ft of space.
• Payroll is probably about $80k per month
• Health insurance, etc. is probably around $10k per month.
• Our co-location facility is probably about $10k
  

I must be missing some stuff because the current monthly burn rate is about $250k which leaves about $50k unaccounted for. Let's write that off as general administrative overhead.

First thing I would do is get rid of the huge 5.4 TB SAN data store. We should never have bought it in the first place. We probably spent a million just getting it installed and set up. We can easily set up servers big enough to meet our data needs, everything is segregated anyway. The only reason I can think of for spending that kind of money on a data store is if we were expecting lots of transactions and data to be recorded over a decade or so.

Second thing I would do is fix the lease. We actually had another 8,000 sq ft of space previously, which was gotten rid of last spring. The space was always way too big. I think that maybe management believed their own predictions of exponential employee growth. By this time according to their old investor deck we should have about 400 employees.

The problem with this is that we spent a LOT of money rebuilding the space to suit our needs, including a huge server room that can't really be used for anything else. It's an air conditioned fishbowl type thing and we could easily cut it to a third it's size (it was never even really close to being filled) but that would require knocking down walls and rewiring stuff. We could easily fit our entire current Stav, including the boss's huge office, into the server room and move the servers into a closet or something, but that is extremely impractical. The logical thing to do is divide the space even further to allow the landlord to rent other parts of it out to other people. But that requires expensive construction which we would have to pay for, and it would be difficult to work while that was going on.

One solution I've heard bandied about is moving all of our servers here to the colocated facility, including our development servers. That would allow us to abandon the space entirely and move to a normal-sized office. However that would force the developers to use painful slow VPN tunnels to access the code. A better solution is getting rid of the co-located facility and moving everything here. That still leaves us with the space issues. The only real solution to that is dividing the space, but it will be extremely difficult as we have all sorts of wiring and building to do. Our space includes a couple large rooms that are just used to hold junk. Closets and loading docks and such. That is totally wasted space. Let's count the savings from getting rid of the co-located facility and call the rest a wash, assuming that the costs of building and rewiring would offset the lower rent.

I have cut out $50k at this point, or 20% of our monthly burn. There is that unaccounted for $50k which I will say we can cut in half, though we really may not be able to. That brings our total savings to $75k, or 30%. We don't want to do anything with payroll or health insurance so that's pretty much all I can cut. We need our people and paycuts would send them scurrying for the jobs they already have lined up for contingencies.

We could sell some of our unused hardware assets to partially finance the buildout, I guess. The real problem is the space. Downsizing the space would save a lot of money but would cost a lot of money upfront as well. Even just to move everything to a new space would probably wipe out at least a couple month's worth of savings on the rent. Let's say we really need to cut some extra money. We abandon this space and move to a smaller space, cut the rent in half and spend however much on moving expenses. That saves an extra $20k per month, not counting outlays, bringing our total up to $95k, or 38%. That's about the best I can do without having a full budget in front of me.

These are all very hard decisions and I'm glad I don't have to make them. However if I had been in a position to make them before we would never have been in this situation. I would never spend money as quickly as the management team did. I would be unable to spend so much money so recklessly.