Downsizing your business – The pains of being practical

A business or a startup is the output of an individual or a group of individuals’ ideals, toils, disappointments, highs and sacrifices to say the very least. Businesses grow because of many factors - gaps in the markets, visionary founders, pragmatic thinkers, risk taking “1st customer”, and the crucial band of the first set of employees.

Downsizing or winding down a business is always tricky and is rarely easy. I have tried to capture some of the key points that will particularly hurt in this process in my article.

PEOPLE

Downsizing is especially hard on the employees, the ones who stay and the ones who leave. Downsizing most of the time starts with people. People take bad news personally and to heart. Important and effective communication is imperative through the entire process. I think most of you will remember the George Clooney movie “Up in the Air”). It’s also unlikely that effective communication will leave the employees walking away feeling that this is the most important and real thing that ever happened to them. Explain the priorities of the business, difficult environments and external conditions. The best thing would be to give employees the maximum cushion as possible; health benefits, assistance in finding a suitable job and now (Airbnb and some others have introduced the same) letting the employees keep their laptop.

REPUTATION

There are two aspects to ‘reputation’ and how detrimental the news of a downsizing can be in the market/ecosystem. The brand equity and good faith built by the company over years or even decades is shattered by all of these incidents. However, if it is because of big external shocks (9’11, 2008, #Corona etc.); to a large extent the news is taken as an output of the times visualised as affecting all companies. Entrepreneurs are emotional characters and very often it is difficult for them to distinguish between personal failure and professional failure. A downsizing can affect the morale and tarnish the image of the entrepreneur in a big way and it takes some doing to get out of this rut.

LEGAL AND FINANCIAL

A lot of things/steps and processes done during a downsizing is done solely to keep the company afloat. Unfortunately, in most cases this results in a whole host of legal and financial problems. Banks will freeze credit lines, employees may sue employers, and customers can withhold payments on purpose and so on.

All these factors and more, result in the very painful process of downsizing/shutting down a business.

If any of you would like to discuss further in confidence, please feel free to reach out to me over PM and we can spend some time thinking over your options. Thanks.