Consider Downsizing Business Activities

One of dozens of strategies listed and linked to here:
How to Make More Money from Your Business


Why would you consider downsizing business activities as a way to increase the profits you make? There are a couple reasons. To start with, even a company which is profitable may not be making a profit in all areas. It is not that uncommon for a profitable enterprise to be losing money in one or more divisions. This is true even with small businesses. A lawn care business might be making money but still have a few customers that generate little income and are far from the base of operations, and so are serviced at a loss.

In a case like that there is an obvious solution: drop those customers. Better yet, find another business which can profitably service these customers, and arrange for that. Just be sure to let them know that you expect reciprocal referrals.

On a larger scale, closing down money-losing parts of a business is just sometimes necessary, and the sooner the better. If you own a chain of five restaurants and two of them consistently lose money despite all your best efforts, close them. Your company profits go up immediately when you cut out those losses.

Of course, it is even better if a sale of those assets is possible. This is more likely with parts of your business that are actually making money, which brings us to the second reason to consider downsizing business activities: to redeploy assets for future growth.

For example, every single one of our forty websites makes some profit, but some make only a little, and they all take some time to manage. If I can sell a few of them (and I may), I can use the money to better market the sites that have more potential. I will have also freed up some time that can be spent in better ways. Even if revenue drops temporarily because of the sale of those sites, it will probably grow once I invest the proceeds and time freed up into out other sites.

Let's look at another example. I know from experience that a carpet cleaner (I used to be one) can make twice as much money per hour on commercial accounts versus small houses. There are big empty spaces and fewer items to move. Now, in theory the business would make the most money by doing any and all jobs that yielded some profit. But how many different directions can the owner go with his time and mental effort? If a he dropped the residential clients (perhaps referring them to a competitor for a fee), he might focus all the time freed up on getting new commercial accounts, and a year later he could, be working less but making more money.

So you can increase profits by downsizing business when the parts you eliminate are losing money, and you can increase profits by downsizing as a way to redeploy and eventually "upsize." Look at all the parts of your business to see if either of these is a possibility.

If you liked this page please let others know with one of these...

Other Relevant Pages

Some Good Businesses

Money Articles

(The newsletter has been discontinued.)

Every Way to Make Money | Consider Downsizing Business Activities