During my work advising small business owners, I have had to have more than one conversation about downsizing. Many of my clients have a hard time accepting this as a problem solving solution. Clients mistakenly believe that downsizing is a sign of failure. It is not! Downsizing, is a type of restructuring and every business needs that from time to time.
When I first started my business I was not sure what I wanted my firm to be. I fluctuated between having a large firm to a small boutique firm. As my practice began to grow, I had law clerks and assistants. I also worked with a few other attorneys. It was great, it was also causing me to work in areas that I really did not care to in order to keep the lights on. The bigger my firm got, the more I wished I could go back to the smaller boutique firm that I considered at first. So, I did. It was for the best and I am much happier because of it.
I have seen it with some of my clients as well. I had a client that owned an assisted living facility. The client owned multiple facilities which housed over 30 people. The client had several employees and contractors to manage as well. At one point the business was not as successful as it once had been. Due to the loss in revenue, debts were mounting and they began to borrow more and more. It got to the point that the business could not recover and had to close. I spoke to my client several years after we shut the business down. She began leasing the properties that she owned to other businesses who run assisted living facilities. She also began consulting them as well. We had a great time talking and she mentioned how happy she was.
I live in Texas and our motto is bigger is better. However, that is not always the case. Sometimes you can make more money by staying small and specializing in a certain service or product will allow you to charge more. It can also make you more nimble.
If you are looking to downsize your business before it downsizes itself, here are some tips:
1) Make a plan. I know you hear me say this all the time, but a good plan makes the difference in your life. How do you want to downsize? What is the business going to look like when it downsizes? Which employees are you going to keep and which are you going to let go? These are the things you need to consider before you downsize. A good plan will help your business survive.
2) You are not a failure. It is okay to downsize and let things go. If you have employees be honest with them that you are downsizing, but you don’t want to make everyone panic and leave on mass. Listen to your employees and contractors. They may be upset about the changes so you should take that into consideration as you are downsizing.
3) Make real changes. It is not enough just to cut expenses. You need to change how your business operates. That may mean culture and climate, it may also mean executive management. Are you the best person to continue running the downsized business? Is it time for you to start grooming someone new?
Don’t wait until you are forced to downsize. Small business owners tend to hold on too tightly to their business. Not being able to see the forest through the trees is not a good thing when it comes to business ownership. Throughout the process you want to maintain a positive demeanor and help keep employee morale up. Know that this is the right thing to do for you and your company. Sometimes downsizing is for the best!
Shahara Wright is an experienced and highly sought after business law attorney and business strategist. She is the author of From Entrepreneur to CEO and host of the CEO Collaboration Circle. Shahara founded The CEO Effect, LLC to work with small business owners who want to implement strategy to build capacity.