Damage-Free Downsizing: 6 Tips for Strategically Scaling Down Your Business

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Downsizing your business is likely one of the most stressful experiences you’ll ever go through. You have a lot at stake – your livelihood first and foremost. Beyond that, you’ll want to ensure you do as little harm as possible to the long-term viability of your business.

Most business owners downsize because the future of their business is threatened. In today’s economy, this is happening more and more as supply chains fail and staffing shortages are the norm. If you’re considering downsizing your business, read on for tips to do it effectively and respectfully.

Try Going Virtual

If your business is such that it can be done from anywhere, consider allowing your employees to work from home. Doing so will drastically reduce overhead costs as you won’t need to keep up with the expenses associated with a physical office. If you need a central place to hold meetings or to collaborate, serviced and virtual offices are a great alternative to a dedicated office space.

Seek Legal Advice Before Commencing Downsizing

Anytime you downsize a company and lay off workers, you must follow legal guidelines for doing it correctly. The laws vary from state to state, but they may include things like minimum requirement severance packages, standard selection criteria, proof that lay-offs are necessary, and appeals procedures. Failing to know and understand the legalities of downsizing your business could result in lawsuits and damage to your reputation. So, hire a business lawyer to be sure you get everything right.

Select Employees to Lay Off

This is the worst part of downsizing a business. Your workers depend on their jobs to support themselves and their families, so choosing which staff members to lay off isn’t easy.

Most employers will use the “first-in, first-out” method. This means the last hired are the first to go. This makes sense from a fairness standpoint and is also the best way to avoid discrimination claims.

Ask for Volunteers

Believe it or not, there are probably a few employees that are willing to take a redundancy package to pursue other interests. They may be considering returning to school, switching careers, or retiring, so taking a voluntary lay-off is the perfect excuse to do so.

Depending on the number of people who volunteer for the lay-off, you may not even need to let anyone else go, making your job much easier.

Offer Early Retirement Packages for Senior Employees

Similar to voluntary layoffs, some senior employees might be willing to take early retirement if the offer is right. This is usually a great option since senior employees often make higher wages than their younger counterparts. By offering a good early retirement plan, you save money in wages while trimming your team to a more manageable number.

Consider the Importance and Size of the Departments Within Your Company

Another way to strategically downsize your business is to focus on the departments themselves. Departments with lots of people will still be able to function well with a personnel cut, whereas a department with only a few employees may not.

Also, consider the importance of each department. In a hospital, for example, it doesn’t make sense to lay off doctors and nurses since they are vital to the operation of the business. In this case, it would make more sense to lay off administrative staff instead.

Downsizing is rarely something a business owner wants to do. However, there are ways to make the process less painful for all involved. By following the tips above, you can strategically downsize your business effectively with as little harm as possible.