Warning Signs That You Should Downsize Your Business
Most business owners plan and plot moves for business growth, but downsizing is not something we tend to think about. It is generally seen as a negative move and something you would want to avoid at all costs, especially for small business owners. However, there are scenarios that could arise making it necessary or even beneficial to downsize your business. Below, we take a look at these in further detail, as well as providing advice on how to go about it.
Should you downsize your business?
If you are debating whether to downsize your business, there are a few key warning signs that you should look out for, including:
- Market uncertainty – Sometimes external factors can impact business decisions. If there is an economic crisis on the horizon, cutting back your business in preparation is not a bad idea.
- Business is on the decline – Are your customers and clients dwindling away? Perhaps a bad online review has caused mayhem? Maybe a competitor has undercut you? No matter what applies, if the custom is not there, you cannot afford to pay for staff members that are not doing anything. Focus on your strategy and respond to the market.
- Labour spend is not on target – If you aren’t hitting your targets, i.e. you are spending too much on staff, it is a clear sign that you need to downsize. It is also important to remember that downsizing does not mean you need to reduce the headcount. There are other solutions. Look for various ways to reduce the cost relating to your people.
- More work is being done remotely – If you have employees that are working from home most of the time, it may mean that you have too many chairs in your office or that your employees are looking for a change of place. The best thing to do is offer contract-from-home positions and move into a smaller office space.
- Your employees keep asking for more work – If your employees keep asking for more work, and you don’t have it available, it could be a sign that you have more workers than required.
Top tips on downsizing your business
If you have decided that downsizing is the best solution for the future of your business, here are some tips on downsizing:
- Seek outside assistance – Downsizing will only be effective if you do it right. Make the wrong move, and it could spell the end for your business. This is why it is important to seek outside assistance from professionals like Todd Yancey of Investor Services. Someone with expert experience will know exactly how to go about downsizing and the different factors that will influence the success of it.
- Take a hit as well – As the company owner, you are going to need to take a pay cut until things have turned around. You cannot expect to keep your salary as high.
- Stay organized – Don’t forget your responsibilities to the employees you have let go. You have to ensure you are up to date with retirement rights and that they get their final paycheck.
- Be as honest as you can – It is important to be transparent without causing hysteria. Your workforce deserves to know the truth. One thing you should never do is tell an outright lie.