The Upside of Downsizing: Why Small Businesses Should Embrace Being Small

Many small businesses actually foil their own chances of success by trying to expand too rapidly — hiring too many employees, taking on too many contracts, buying too much equipment etc. This mistake is known as premature scaling, and it’s estimated that it accounts for the failure of up to 50 percent of small businesses.

Surprisingly, having a smaller workforce and fewer resources may actually give you an enhanced ability to succeed in a competitive environment, as you’ll have less management responsibilities and more time to focus on mission-critical aspects like outreach and product/service improvement. Here are three ways to downsize effectively, and how they can help your company earn more profit:

Consolidating and Eliminating Positions

You can significantly reduce payroll expenditure by having employees take on more duties in each position, rather than delegating highly specific tasks to a large number of employees. Doing this will not only lower your employee count, thereby easing the burden of micromanaging, it will also cause your remaining employees to gain a greater understanding of how the business runs because they’ll be more involved in multiple processes.

There are no cut and dry rules here as each industry is different, but use discretion and common sense when combining positions or terminating employees. Make sure you don’t go towards the opposite end of the spectrum and spread your workers thin by giving them too much to handle individually.

Reducing Overhead and Obligations

If you have a 50-inch flat-screen in the waiting area of your shop and you’re behind on bills I don’t think you need anyone to tell you that it’s time to “liquidate” that thing. But sometimes opportunities to reduce overhead aren’t so obvious, so we’ve created a little list to help you out:

  • Save on utility bills by studying energy management.
  • Stop buying into “guru-ism”. Yes, we’re referring to those not-so-informative “informational” products that you seem to think will unlock the key to success. Also, avoid “coaching” courses and seminars that cost $2000 a pop. Invest that money in advertising avenues that offer tangible results, like PPC, SEO, and joint ventures.
  • Cancel magazine subscriptions – your office is not a library; people don’t come there to read the latest copy of the Smithsonian. While it is good to have some reading material to keep visitors occupied while waiting, you don’t need to change out every magazine with the latest edition on a monthly basis. Replace your costly subscriptions with a box of used magazines.
  • Centralize loan repayments with a consolidation loan and use a balance transfer credit card to get all of your balances onto one card.

Taking Matters Into Your Own Hands

Finally, when you’re left with fewer employees to help you out (or get in your way) you may actually find that you’re more productive individually. Yes, you’ll have to work more hours initially, and you won’t feel “like a boss” as much as you used to, but in the end if you want something done right, you really have to do it yourself. Some of the most successful businesses in the world were built on the backs of a small group of entrepreneurs who buckled down and dug in until their efforts paid off. That type of commitment and dedication can’t be bought. As a final thought, ask yourself this:

“Is my business failing because it is in the hands of too many people who don’t care whether it succeeds?”

Dennis Lexington is a passionate blogger experienced in all matters related to corporate and personal finance. He’s had the pleasure of cooperating with some of the world’s leading brands including Trust Deed Scotland.

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