How To Effectively Downsize Your Company

Downsizing is the act of reducing the size of your company to lessen costs or extend profitability. The act of downsizing is a perfectly legitimate business strategy, a path that many businesses will take if the opportunity arises. While it is perfectly normal to consider shrinking your company, there are a few hurdles to clear to make the transition easier.

You have a lot to think about when you make any change to your company, no matter how big these end up being. Therefore, there are some aspects to consider when you decide to downsize. You will find all the relevant advice on downsizing listed below.


Hiring Freeze

A company that is experiencing success will always have a need for more employees. Therefore, it is likely that you will have several job adverts out there awaiting a response. However, business isn’t always as predictable as you may think, so growing your business might not be the key to more profit. 

If you find yourself faced with the option to downsize, one of your first steps should be to freeze or delete any outstanding job adverts that you have placed. Promising potential job candidates a role that no longer exists could place you in awkward legal waters, so make sure that you aren’t sending a message to the world that you are expanding when downsizing is on the cards.


Offer Voluntary Redundancy

One of the biggest steps you need to take when downsizing is to reduce the number of employees on your payroll as you move forward. This fact can place you in a tough situation but letting go of key employees isn’t as stressful as you may think. Fortunately, there are a few redundancy options on the table for anyone that needs to downsize.

Downsizing means that you do not have to fire any of your employees, instead, you can choose to offer them incentives to take voluntary redundancy. A healthy severance package can keep your employees afloat until they find another role, or you can opt for outplacement services to keep them in gainful employment. The latter is often the most favourable of the two options, so visit Randstad RiseSmart to find out how outplacement works. There needs to be a benefit to taking redundancy, and taking up the same position elsewhere is a relatively easy transition to make.


Reduce Your Costs

Of course, the biggest factor that is going to hamper your monthly profit margins is the size of your monthly outgoings. A business needs to spend money to make money; however, an imbalance of these practices can cause you trouble, especially if you are seeking to downsize your company.

Running a smaller operation may mean that you can no longer keep up with some of your inventory or manufacturing costs, which means that you need to reduce them somehow. A good place to start is by comparing the prices of different suppliers and finding a company that provides the same materials at a lower cost. What’s more, by making less of the same product, you should be able to reduce your manufacturing costs.


Time It Perfectly

Business is never steady throughout the year. There are holidays that you need to consider and, depending on the nature of your business, you could end up making more, or less money during these busy periods. Unfortunately, this can make it difficult to make changes to your business structure.

Firstly, you do not want your staff to be taking redundancy around the Christmas holidays. This will make it extremely difficult for these individuals to find new work and paint your company in a bad light at the same time. Secondly, a boost in profits during a key holiday may cause you to re-evaluate your current success. Perhaps this sudden influx of profit can cover months where you are losing money, making it less likely that you need to downsize in the first place.

It isn’t easy but try to navigate the calendar to find the best time to make initiate your downsizing plans.


Be Transparent

Downsizing a company is going to influence everybody that is involved in your business, including your suppliers, your staff, and all your investors. Therefore, these individuals will need to make changes based on your decision.

It is unfair not to include these people in your plans to change business strategies. You should make it known that you plan to downsize as soon as you have made the decisions. This will allow those around you to plan accordingly, and it leaves you in good stead as you part ways.



Downsizing does not have to be a difficult process if you take the right steps. Try to remember that you are not the only person that this decision will affect, and be transparent about your plans whenever possible. There is a long history of companies that have downsized successfully, so you are in good company.