When Should You Consider Downsizing Your Business And How Should You Go About It?

While most people would consider that the only reason for downsizing a business would be because of financial instability or significant losses, there are plenty of other reasons why it might be beneficial for a business owner to slow things down. While most people are well acquainted with how to setup and maintain a business, there tend to only be a few who know how to successfully downsize with minimal fuss and expense. But not to worry, we’re here to help. Read on for a run through of potential reasons to downsize and the most effective ways to carry the process out.

Financial Instability

Let’s start with the most obvious reason to consider a downsize: financial instability. If your company is failing to make steady profits or is perhaps making losses, you may have to start downsizing in order to avoid financial bankruptcy. Bankruptcy, of course, is something that you should avoid at all costs. It tarnishes your reputation as a business owner and manager, can see your property and possessions be repossessed and will also ruin your credit rating, meaning that in the futures lenders will be reluctant to offer you money. If your business begins coming across hard times, you may think that you merely need to cut back on expenses and encourage your staff to work a little harder to create connections with new customers. However, this isn’t always successful and often you will merely end up pushing your workforce too far, causing tensions and bad relations between different levels of management in the company. If you are considering downsizing due to financial instability, the first step towards taking the move is to be realistic. Rather than optimistically hoping that things will pick up sooner or later, you need to be more practical. Remember that economic downturn is a trend that cannot quickly reverse and growth will be slow. Once you’ve settled on downsizing, identify which areas of your company make the most profit and focus your energy on these. Areas that aren’t bringing in a good turnover should be cut. It’s best to make this cut sooner rather than later, as it will reduce your overall debt as time goes by.


A second reason that many businesses begin to downsize is altogether more positive: it pertains to outsourcing. Outsourcing is a business practice in which certain jobs are handed over to an external individual or company rather than having an in-house employee or department handle them. There are numerous benefits to this. Having in-house departments and employees is relatively expensive and a pretty big responsibility. You have to offer them contracted hours, sort their taxes out for them, offer sick pay, holiday pay and paid maternity or paternity leave. Then you have to ensure that you train them effectively and regularly and also invest in extra commercial property space for them to work in. What’s more? It involves taking on more staff to deal with their payroll! Outsourcing can mean having the same job done without having to take on major responsibility in regards to the individual carrying the work out. If this sounds good, there are plenty of areas of your company that you can outsource. First, IT. Instead of having an IT consultant in-house, you can outsource your IT Consulting Services. Specialists will then evaluate the adequacy of disaster recovery and back up plan, secure data privacy and prevent corruption through firewall and virus protection, gauge whether your hardware is still entitled to manufacturer support and reduce internet connectivity redundancy to ensure you have the required speed for maximum performance. You should also consider outsourcing content marketing. This will help you to generate leads and make more sales with the fresh outlook of someone who is laying new eyes on your company and its products. This technique is proving increasingly popular, as LinkedIn notes that 75% of companies are currently outsourcing their content marketing in one way or another.

Reevaluating Your Work Life Balance

Believe it or not, every business owner’s life doesn’t revolve solely around their company and the office. They have their own personal lives too. Often, a business owner’s main goal isn’t to produce the biggest company possible, bringing in a huge turnover. Many actually set up their company to provide them with a sufficient and maintainable income. They generally intend to use this to support themselves and their family. So, once they’re earning enough to do this, they’re generally content. It is easy to get caught up in a business, enjoying its success and dedicating more hours to its progression and maintenance. However, sometimes business owners will realize that their work life balance isn’t what they wanted it to be and will decide to downsize in order to spend more time at home with their loved ones and enjoying the fruits of their labor. While you might question why they don’t merely take on a partner or manager to keep things going while they’re not in the office, chances are that they want to maintain complete control over their brand without having to answer to someone else. So they will alternatively downsize, as this allows them to maintain their control without having to sacrifice their familial or social time. If this is something that appeals to you, you must first remember that the work you are offering to your staff is often their livelihood. Give them plenty of time to find new positions before shutting down departments or letting people go. You could also offer many reduced hours rather than taking them away altogether. Perhaps you could reduce the operating days or hours of your business rather than making more dramatic cuts to your staff base.

These are just a few reasons for downsizing. Remember that there are plenty more out there. When it comes down to it, you will know what is best for your business and you simply have to ensure that you go about initiating change to your company’s structure in the most compassionate and understanding way possible. This will help you to maintain good relations with the staff members who have helped your business to flourish.

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