When the business struggles, here’s how to talk to your team

The hardest part wasn’t watching our cash reserves dip below six figures. It wasn’t the contract that fell through or the investor who ghosted after months of nodding. It was the day I looked my team in the eye and told them we might have to cut salaries to survive the quarter.

I still remember what that meeting felt like: the way the air changed, the way people avoided eye contact, the way silence stretched longer than any budget forecast. Founders often prepare for customer objections, investor due diligence, or public pivots. But very few are ready for the day when optimism becomes a liability—and honesty becomes the only thing that can hold the team together. This is the part of the founder journey that no pitch deck prepares you for: how to lead when the business is struggling and the narrative has cracked.

We were six months post-raise. Things were moving—but slower than planned. Customer acquisition cost was climbing. Enterprise deals took longer to close. We were adjusting our pricing and product positioning almost weekly. Typical post-seed chaos. But the underlying burn was real. We were hiring cautiously, but the headcount still outpaced revenue. I kept thinking we’d catch up. That the next quarter would bring the rebound. That one good customer case study would unlock the rest.

So I kept the tone upbeat in team meetings. "We're in a building phase." "Momentum is coming." "Let’s stay focused on our North Star." The usual founder optimism. The thing we’re taught to cultivate and protect—especially when other people’s livelihoods depend on it.

But behind the scenes, I was meeting with the accountant twice a week. We were modeling payroll scenarios where we might need to cut 20%, 30%, even 50%. I didn’t share that yet. I told myself I was shielding the team from worry. That they needed focus, not fear. But really, I was avoiding the mirror.

You think you’re hiding it. But your team can feel the shift long before you say it. They see the delayed product roadmap. They notice the way you’ve stopped talking about hiring. They watch the way Slack threads get quieter, how leadership 1:1s become more “checking in” and less “charging ahead.”

For us, the moment it cracked was during a Friday stand-up. Our operations lead, who’d been with us since the second month, asked a question during Q&A: “Hey, should we be thinking about alternative revenue channels? I know we’ve been exploring a few.” It was a gentle prompt. Strategic, framed as growth-oriented. But I knew what she was really asking: Are we okay?

I gave the kind of founder answer that sounds responsible but says nothing. “Yes, we’re exploring a few levers. It’s good to be proactive.” Then I moved on. After the call, she messaged: “Let me know if you need help with scenario planning.” That hit me hard. Not because it was pushy—but because it was generous. She knew. And she was giving me space to tell the truth. I didn’t take it. Not yet.

Over the next three weeks, I watched energy drop. People showed up, but not in the same way. They delivered, but not with the spark we’d had before. One teammate asked to move to a four-day week. Another asked quietly if we’d considered a “remote-first downsizing strategy.” These were loyal people. Builders. Not churners. But the writing was on the wall, and I was the only one pretending not to see it. The final push came when one of our engineers resigned. She was one of the most stable, quiet rocks on the team. Her email was kind, professional, and direct:

“I’ve learned so much here, and I’m grateful. But I no longer feel confident about the company’s direction or stability. I hope this gives you time to hire and transition smoothly.”

She wasn’t angry. She wasn’t even nervous. She was just done waiting for clarity that wasn’t coming. That resignation was my wake-up call. Not because it was a big loss in capacity—but because it was a loss in credibility. And once you lose that, the rest unravels quickly.

I did three things that week.

First, I called a mentor. Someone who’d been through worse—firing cofounders, shuttering a startup, raising again after liquidation. I told him the situation. He said this:

“Tell them. Don’t wait until you can fix it. That’s not leadership. That’s PR. They don’t want your certainty—they want your courage.”

Second, I drafted a written update. It wasn’t a manifesto. Just a clear explanation: where we are, how we got here, what we’re doing next. I left space for questions. I made it human, not heroic.

Third, I scheduled an all-hands meeting. No slides. No performance. Just a conversation. I opened with: “I’ve been holding something too long. You deserve to hear it straight.”

And I told them.

Here’s what I’ve learned from doing it wrong—and finally, doing it right.

1. Don’t wait until you have a full recovery plan

Most founders stall communication because they want to pair bad news with a heroic fix. “We’re cutting costs, but here’s a new customer win.” “Runway is tight, but we’ve got a lead investor interested.” Don’t fall into that trap. The sooner you speak, the more credibility you retain. Even if you don’t have all the answers, you can say: “Here’s what we know, here’s what we’re exploring, and here’s what could change.”

2. Speak like a human, not a CEO

You don’t need a crisis comms template. You need a tone your team recognizes. Something real. Something that matches the startup you said you were building. If you’ve always been casual, don’t switch to formal just because you’re scared. Say it plainly:

“Revenue is down 30%. That’s put pressure on cash flow. Our projections have shifted, and we’re exploring several paths—including possible cuts.”

Tone matters. But authenticity matters more.

3. Offer clarity, not control

You don’t need to over-explain or over-promise. Don’t try to manage every emotion in the room. What your team wants is clarity on what’s real, what’s next, and where they stand. Tell them what happens if X, Y, or Z occurs. Give them timelines. Invite questions. Don’t shut down hard truths. You are not there to perform strength. You are there to model trust.

4. Acknowledge how it affects them

Say the quiet part out loud: “I know this creates uncertainty. I know you have families, commitments, and plans. You don’t owe us blind loyalty.” That line alone gave two people on my team the space to ask hard questions—and ultimately, to stay. Not because I sugarcoated things. But because I made room for them to choose based on truth.

Not everyone stayed. Two people left within a month. But they left with respect, not resentment. And they helped us transition smoothly. Others doubled down. They took pay cuts. They reprioritized features. They asked what else they could do. And that energy—that grounded, gritty belief—saved our momentum. The team didn’t need me to be perfect. They needed me to be honest. And when I gave them that, they gave it back tenfold.

If I could do it again, I’d have these conversations sooner. I’d resist the instinct to protect people by withholding truth. Because what your team really needs in a downturn is not hope. It’s honesty.

They can’t help if they don’t know. They can’t decide if they don’t see the real picture. And they can’t follow you if you’re hiding behind good news while the floor cracks beneath you. Founders often think communication is about morale. But in moments like these, it’s about dignity. Let people be adults. Let them process. Let them choose. That’s respect.

You’re not weak for admitting the business is struggling. You’re not failing your team by being transparent. What breaks trust is not the bad news—it’s the silence. Speak. Even if it’s messy. Even if your voice shakes. Even if you don’t know what the next month holds. Say what’s true. Ask for help. Offer options. Make space for others to process. And then—keep going.

You can raise millions and still feel like you’re failing. You can have a great product and still run out of time. You can build a loyal team and still face hard choices that hurt. But if you communicate with courage—if you show up when it’s hard, not just when it’s easy—then you’re not just building a company. You’re building trust that lasts longer than one bad quarter. And in this journey, that might be the most valuable thing of all.