Lessons Every Boss Learns When They Downsize Their Business
Businesses always try to grow, expand, and take advantage of new markets. However, sometimes it doesn’t work out how bosses imagine and, eventually, parts of the company become unprofitable.
Downsizing is a kind of exit strategy for your company. It’s what you do when you realize that you can’t actually expand as fast as you’d like and need to do some hunkering down.
Right now, a lot of businesses are considering scaling back their operations. Companies in the travel industry, for instance, have been hit exceptionally hard by COVID-19 and are going into survival mode to ensure that they can emerge through the other side of the pandemic. When you think about the impact on the sector, it is amazing that more companies haven’t gone out of business.
In this post, we’re going to take a look at some of the lessons that bosses learn when they downsize their businesses. Check them out below:
You Should Hire Outside Help
Just as growth often requires the help of external consultants, so too does downsizing. You need professional advice for which parts of your business you should abandon, and where you should focus your remaining resources.
Remember, the choice may not always be clear cut. Choosing a particular course of action is extremely challenging, and even experienced bosses get it wrong. For instance, you might be thinking about shutting an unprofitable location. But that particular outlet might be in a growth area and could generate substantial revenues in the future.
You Should Always Hold Onto Old Office Equipment
During COVID-19, many companies have closed their offices, or are considering downsizing them. This strategy is sensible – there’s no point renting space you don’t need.
However, they have a problem: what to do with all that spare furniture.
It’s not clear exactly how working practices will change in the future. Only time will tell. Using a storage facility for it in the interim, therefore, is a good policy. Replacing tables and chairs is notoriously expensive, especially if you buy new.
You Should Examine Historical Examples Of Downsizing
Downsizing is something that countless companies have done over the years. Sometimes, recessions make it a necessity. Or there are changes in technology outside of their control that force them to reduce the scale of their operations.
Whatever the case, it can be beneficial to reflect on historical examples and learn the lessons from them. In 2009, for instance, General Motors laid off 50,000 members of staff and closed down several of its factories. However, it is still going strong today, with a minimum of government support.
You Should Examine Legal Consequences
During the course of regular operations, companies sign contracts with their customers, obliging them to fulfill their end of the deal. However, when you downsize, you may not be able to complete projects according to the terms set out in your SLAs, leading to legal issues.
Experienced bosses, therefore, try to downsize with one eye on their obligations. They tied up loose ends before making radical organizational changes.