Downsizing Your Small Business and How to Do it Right
November 16, 2020 | Last Updated on: July 22, 2022
November 16, 2020 | Last Updated on: July 22, 2022
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There’s no denying that 2020 has been an extremely challenging year for the small business world. COVID-19 has caused an economic downturn that has forced many small business owners to make hard choices in order to keep their businesses moving forward—including downsizing.
The downsizing process can be a difficult one—but it can also be the right choice for your business.
The question is, how do you know when (or if) to downsize—and if you do decide to move forward with downsizing, how do you downsize in a way that minimizes negative impact and maximizes your business’ potential to grow and evolve in the future?
Before you move forward with downsizing, you need to determine if it’s the right choice for your business—and, if so, if now is the right time to downsize your company.
There are a few questions you’ll want to ask yourself when trying to determine if and when to downsize your company, including:
Ultimately, there’s no formula for knowing if and when to downsize; only you can make the call as to whether it’s the best option for your business.
But if you do decide to downsize your company, you want to do it the right way. Here are some tips to make the downsizing process as good as it can be—for you and your team:
While downsizing your business can help with cash flow issues, it’s not going to immediately solve the problems that led to the need to reduce head count to begin with. So, while COVID may be the catalyst for downsizing your business, it’s important to recognize the specific reasons and issues that led to the need to downsize.
For example, maybe you’re downsizing because COVID has limited your business’ abilities to serve your customers in person, which has caused your profits to significantly decrease. Or maybe you’re struggling with supply chain issues, which has made it more challenging to operate your business.
Whatever the reasons behind your need to downsize, it’s important to identify them from the start. Because once you know the specific circumstances that are causing you to downsize, you can…
Making the decision to downsize is a tough one. But if you want that decision to be the right one for your business, you can’t just impulsively start laying people off and hope for the best.
If you want your downsizing to ultimately help your business, you need a plan.
While every company’s downsizing plan will be different, there are a few elements every business needs to address in their plan, including:
Once you do decide which employees within your company are going to be laid off, it’s extremely important to do everything you can to support them during the transition.
What that support looks like will depend on your company and the resources you have available. For example, if you have the resources, you might consider offering your employees a severance package that includes a month’s wages and an extension on their health care. Or, if you don’t have those kind of resources at your disposal, you might have your HR department put together a list of job-seeking resources to help your ex-employees on their new job search or offer to write a letter of recommendation that outlines explains termination was due to corporate downsizing—and that your decision-making process had nothing to do with job-related issues or performance.
The point is, getting laid off is hard—and as a business owner, anything you can do to make it easier on your employees should be on the top of your priority list.
Layoffs are (obviously) hard on the employees who are being let go—but it can also be challenging for the remaining employees, who watched their co-workers positions get eliminated.
Downsizing can cause employee morale to drop for your remaining team, which can lead to all sorts of issues—including issues with productivity, performance, and retention. If you want your downsizing to ultimately have a positive impact on your business—and to keep your company moving forward—you need to bring that morale up and provide support to your remaining staff.
Again, this support may take different forms depending on your business, your team, and the resources available. You may want to hold an all-hands meeting to explain the restructuring and what it means for your business moving forward. You may want to schedule one-on-one meetings with individual employees to check in and see how they’re handling the downsizing (and reassure them that their job isn’t at risk) or ask human resources to put together a plan to boost morale post-downsizing.
Supporting your employees that have been laid off is important—but if you want your business to emerge from the other side of downsizing successful, providing support to your existing team through the transition is just as important.
Downsizing your company is never easy. But there are ways to downsize that can make the process a bit easier—so if you do have to make the decision to downsize, you can at least have a plan that makes the best of a challenging situation, both for your company and for your team.
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