Businesses are like living organisms; they need to move and adapt to the markets and customers they serve in order to thrive.
However, it can be hard to move and change course at a drop of a hat if you have to deal with large amounts of assets.
It’s never too early or too late to assess your business and think about downsizing. Investing some time to decide what needs to be cut loose now, before it turns into a hindrance, will save you a lot of trouble and surprises down the road.
Smart downsizing will yield:
- fewer losses
- more profit
- a cleaner path to success and growth
- more sustainable operations
- no unnecessary drainage of resources
So we’re here to help you with suggestions on some areas of business that might be overdue for some pruning.
Let Go of Low Performers
If you’re a good boss, the last thing you’d want lay your team members off. However, as a wise boss, you’ll have to conduct those tough conversations for the good of your enterprise.
Are you well-staffed, yet the job is not getting done? Well, there’s a fair chance your predicament can be explained by Price’s Law.
The maxim states that the square root of your employees is doing half the work in the company — that is, 3 out of 9 people will take on half the workload, or 10 out of a hundred. This means that your low performers are just tagging along and leeching of the effort of others.
You probably have an idea of who they are.
Try additional training or having an honest conversation first. If this doesn’t result in improvements, maybe it’s time to shake hands and break ties.
Downsize the Office Space
The slightly worn-out, yet still fairly accurate, phrase of “the new normal” encompasses remote work as the solution many businesses implement to keep their workforce on the payroll while also cutting costs. If your profits have plummeted, but you still have large office expenses every month that bleed your account dry, consider moving into a smaller space.
With most of your employees now regularly working remotely, you could do quite nicely with a smaller space. In fact, that will likely result in significant savings. Moving is never easy, we know, but it may be the quickest and the most painless way of getting your expenses under control.
That way, you can funnel the money that used to be needlessly wasted on unused office space into marketing that new product you’ve been working on for so long.
Or, you could redo that webshop that has become your largest sales channel to make it even more attractive.
Eliminate Unnecessary or Cost-Ineffective Assets
Even a stagnant, unused asset is not a zero-sum game. It costs you just by depreciation alone.
You almost certainly have some assets you could do away with — and would be far better off without.
They may be costing you in maintenance and insurance fees, or you use so rarely that it would be more cost-effective to outsource or rent when the need arises.
Do you have vehicles and machinery rusting away, storage spaces sitting there empty, or expensive IT equipment and software that are now outdated?
The best thing you can do in that situation is to take stock and conduct a comprehensive asset inventory.
That will help you assess where there is room for downsizing. Take everything from lifecycle costs to predicting future maintenance costs and depreciation into account.
Then, when you gather the data, make the best out of it. Eliminate what is useless, sell what can be of use to someone else, or rent what you are not currently using, but that nevertheless may be useful down the line.
Make sure that these assets at least cover their own maintenance so that you can eliminate the costs of keeping them.
Focus on Improving High-Profit Products & Services
Regardless of the number of products or services in your portfolio, some of them will always be performing better than others. You may feel that they are objectively both equally good, but the market has spoken.
If you’ve been distributing your costs pretty much uniformly over your entire range despite diminishing returns, you’re hindering your growth. Instead of investing large amounts of money into promoting the underdog, just let it go.
Stop investing, let the product grow or fail organically. If it fails, phase it out with no regrets.
Reallocate the resources you’ve saved by letting the underperformer sink and pump more juice into your star products or services to support the growth of the bestsellers that generate the most profit for your company in general.
Start thinking about streamlining your offer to focus on those products that have passed the test of client demand so that future investments have the largest possible ROI echo where it counts.
Every time any entity advances to a higher level, something gets sacrificed to facilitate new and improved processes that sustain growth.
So, look at your workforce and their performance carefully.
Determine who is not pulling their weight and deal with the situation to your benefit.
Revisit your workspace arrangements in this new unprecedented situation and opt for the more cost-effective option.
Spend some time assessing all of your assets and the state they are in, and then manage the red flags unnecessarily leaching your budget.
And finally, focus attention and direct resources into what already works and brings in profit. Energy goes where attention flows, and attention to these crucial details might be the most valuable resource you have.
If done intelligently and with care, avoiding some of the most common mistakes, downsizing is anything but a loss.
In fact, it liberates you from everything that has been draining precious resources and gives you the space to develop your potential, reaching new levels of success.