It means reducing the cash outflows of the business.
Practically, it refers to minimizing both the opex (e.g. marketing, salaries, rent, suppliers, ...) and the capex: (i.e. investments)
So it’s not just “cutting costs” but managing real cash outflows to preserve liquidity.
Best,
Franco
Great question. You might be wondering "Why minimize cash spending specifically? Isn't that basically the same as minimizing costs?"
Not always, and this distinction matters (especially during a liquidity crisis).
Some costs don't drain cash immediately. Think of machinery or equipment: it shows up as a cost through amortization, spread over years, but the cash may have already left long ago. Similarly, some costs are billed once at year-end, or are fixed commitments you simply can't cancel mid-crisis, so even if you wanted to stop them, you couldn't free up cash in the short term.
What we actually care about here are the costs that drain cash right now. Two basic examples:
These are the levers. That's where the focus goes.
P.S. One thing worth noting: this level of nuance (distinguishing between cash outflows and accounting costs) is frankly quite advanced for an entry-level role like a McKinsey BA. You'd more typically hear it from an Associate or Experienced Hire. But if you can bring this distinction into an interview naturally, it signals serious business maturity!
Hi there,
It means minimizing any expenses, whether it be operational or capex.
There is a fundamental difference between accrual accounting view and cash accounting view.
Metrics like EBITDA or Net Income do typically not reflect cash situations properly. Many "expenses" or "incomes" are purely accounting-based (e.g. depreciation, capitalized lease expenses).
Cash is king, hence, focus on free cash flow of a company. Cash expenses, net working capital, capital expenditures, investments...
What a great question to ask your case interviewer! Remember, you're allowed to clarify in a case. To be clear: I have an interpretation of that, but it might change per business case, etc. So I ALWAYS clarify.
For more on handling ambiguity and driving cases forward, my case interview course covers this end to end.
It means reducing actual money going out of the business, not just accounting costs.
Some costs show up on a P&L but don't involve real cash. Depreciation is the classic example. Minimising cash spending ignores those and focuses only on real outflows: salaries, rent, supplier payments, capex.
It usually comes up in turnaround or cash crunch cases where the client needs to survive short term, not just improve margins.
