There are many reasons why a business may need to downsize. From rises in costs to taking on more than you can chew, it’s always better to learn to walk before you start to run. Many business owners don’t like the sound of downsizing because it sounds like failing.
Quite the contrary; downsizing could be the only thing that saves your business and allows it to move forward in the future. If you’ve been thinking about downsizing your business, here are some clear signs you should.
One of the most obvious signs for downsizing is financial difficulty. It’s one thing to stop making as much money as you’re used to but it’s another to get into debt and be unable to pay your debtors. At that point, you will risk losing your business forever.
In this position, business owners have two options. You can either file for bankruptcy which may mean you aren’t allowed to open a new business in the future or you can downsize. Downsizing means cutting costs and saving money so you can pay off your debt.
Working From Home
During COVID-19, a lot of people started working from home and never returned to work. For many workers, it gives them a better quality of life and they’re more productive. If this is the case for your workers, you may be paying for office space that you don’t need anymore.
It could be worth looking for smaller office space and saving money for the business. You can even use business storage for holding office supplies while you try and sell what you no longer need.
Not Meeting Goals
Every business should have clear goals for the future. If you have a five year plan for your business, you should have specific goals that you’d like to meet. Some businesses won’t meet these goals in the first three years of business but if your business is older than that and you’re constantly missing targets, it’s time to do something about it.
Downsizing can help you to refocus and set new, more achievable goals.
You Have No Work-Life Balance
Most business owners blur the lines between work and life- it’s part of the package. However, you need to look after yourself if you want your business to succeed. If you’re finding that your work is overtaking vacation time and you very rarely get time to spend with your family, you’re probably doing too much.
If you can’t afford to hire someone you can delegate your work to when you’re not there, it’s time to downsize. In addition to the success of your business, you also need to think about your personal health.
Productivity Is Slowing
There could be a few reasons why productivity is slowing. If you have been accepting more work but you haven’t got a bigger team to produce it, you’re going to exhaust your current workers. When workers are tired, productivity will be lacking.
It could also be because workers have lost their enthusiasm for the business. As a business owner, it’s your job to inspire your workers and entrust them with the vision you have for your business.
Too Much, Too Fast
Starting a business is exciting and it’s easy to get carried away. From a longevity point of view, it’s important to go slowly and build a solid customer base before expanding. If your customer base isn’t strong, you may be left with no customers when you introduce new products.
Expansion should be based on thorough research and strong development of business goals. If you have gone too fast, too soon, it could be time to scale back again. Going backwards doesn’t mean you’ll never be able to go forwards.
Downsizing For The Right Reasons
Deciding to downsize your business should never be done lightly. It’s a big decision to make and within that decision has to be acceptance for working towards better goals in the future. Choosing to downsize can be a wise decision and one that will allow you to do bigger and better things in the future.
If downsizing is something that you think will benefit your business, you should be transparent about it with your employees. Explain the situation and advise them that redundancies could take place. Keep as many of your employees as you can but it’s vital that you think of the future first and foremost.
If you can, get advice from other business owners who have downsized before so you can see the potential outcome. If you’ve found this article helpful, take a look at the rest.