The 7 Step Process to a Safer Downsizing

January 20th, 2009 by | Print

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Did you see the true life epic, The Perfect Storm, with George Clooney, Mark Wahlberg and John C Reilly?

 

Just a quick synopsis if you didn’t. This movie retells the ill-fated 1991 final voyage of the commercial fishing vessel, Andrea Gail. With an unsuccessful season ending, Cpt. Billy Tyne and his five longliners venture out for the rich waters of the Flemish Cap for one last haul. When the ice machine that preserves the fish breaks down, the crew pulls up their lines and head back to port.

 

However, between the Andrea Gail and its port in Gloucester, Mass is roughly a 300 mile run through the perfect storm. With reported waves in excess of 100 feet and wind gusts over 80 mph, Cpt Tyne and crew must decide between safety and failure (waiting out the storm while their fish spoil) or a dangerous shipwrecking run to set the market. Not realizing the full nasty nature of what lies ahead, the Gloucester fisherman vote success over safety.

 

Nobody really knows how the Andrea Gail and crew met its demise, but reports indicate that the only signs of her were washed up debris found days later on the shores of Sable Island.

 

What does all of this have to do with you making tough decisions in a down market?

 

You, like many other solopreneurs today, have some tough decisions to make in this current economic perfect storm. If 2008 was a slow season, can you afford to sit out 2009? Or do you choose to find a way to navigate the storm and hope that you don’t end up like the Andrea Gail?

 

Since it is highly unlikely that you will be next in line for a government bail out, it’s time to lighten the load before you take on water and sink.

 

The following are my recommendations (in sequential order) for giving you the best chances for success with downsizing:

 

1. Re-evaluate the mission of your business.

Challenging times create an excellent opportunity to reassess your business mission and goals. If you aren’t truly committed to the effort, make quick, decisive decisions to get you moving in the right direction. Don’t move to the next step until you accomplish this task.

 

2. Don’t take any topic off of the table.

Everything needs to be considered for either reduction or elimination. It is far too easy to say “I can’t possibly live without that” without reviewing it first. Although not all aspects of your business require elimination, take a review of all items to see where inefficiencies can be eliminated.

 

3. Discriminate between business “needs” and “wants”.

Take the hard line with each item of your business to assess preference versus necessity. If your business survival is at stake you can’t afford to risk your financial security on preferences.

 

4. Compare cost to value.

Cost is risk. Value is reward. Simply marking an item for elimination based upon the risk without assessing the reward is neither safe nor wise. If an item cost is equal to or greater than the profit that it returns, it is a prime target for reduction or elimination. However, before giving it the ax, remember to consider upcoming value in the short term, too. Some newer expenses may not have had the opportunity to mature and pay a return.

 

5. Identify opportunities for creative solutions.

Barter with other businesses to trade your goods and services for those that you need. The bottom line cost to your business will be reduced while your incoming benefits remain the same. Renegotiating contracts, joint ventures, and co-op marketing are just some other examples of possible solutions. If an aspect of your business brings value to your mission, it is better to work up a creative solution than deciding it needs to go.

 

6. Prioritize the order of reductions and set a schedule.

Create a list in descending order of little value / want to valuable / need of the different items up for reduction or elimination. Start with the top of the list and set dates when to begin the cuts. Hopefully, your business will make a profitable turn before you get to the bottom of the list.

 

7. Watch the market.

The market as a whole and your target market will give you guidance as to whether you need to increase or decrease the amount of your downsizing. Make sure you stay aware through research as to the trends in your industry and the greater market as a whole.

 

Marcom programs are a typical scapegoat for budget cuts. However, many businesses start with advertising campaigns mainly because they don’t have an effective means for assessing their ROI. Without the ability to track ROI, marketing becomes an expense and not a profit producer. Does your marketing need to go, or do you need to find a way to communicate with the market more effectively? Simply reducing your marketing is not always the safest choice.

 

There is an upside to downsizing if you do it smartly. Through this process you may find solutions that allow you to operate your business more efficiently than before. Then when your business rebounds, you may find that you have a leaner, more efficient company with a lower overhead to clear in order to pack on the profit.

 

The company and captain of the Andrea Gail had to choose between failure and fishing. They chose fishing. The captain and crew had to choose between failure and a big payoff. There was no payday for sitting in port. They chose to take the risk for the reward. Do you find your business in the same situation?

 

If the Andrea Gail had a new ice machine instead of the budgeted rebuild, could it have sat in safer waters until the storm passed and returned to a pay day? Realize the impact of your cost cutting decisions. Otherwise, you may end up lost at sea.

 

All The Best,

Doug Dolan
The Solopreneur’s Guide

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2 Responses to “The 7 Step Process to a Safer Downsizing”

  1. Guide To Fishing Says:

    Obviously this is a popular blog with great data so well done on your success and interesting topic it should be discussed. Did you totally agree with the top half of this? The rest was fine and informative. Ill check back soon for any added comments, thanks.

  2. Douglas Dolan Says:

    Thank you for the compliments.

    When you ask if I agree with the top half of this are you referring to the actual events of the Andrea Gail? The synopsis that I have in the post was based upon the details in the movie. Whether factual or Hollywood hype is up for possible debate – as are all movies based upon true events.

    Doing some research on Google provides little additional data about the Andrea Gail other than debris was found on the shores of Sable Island and that the emergency transponder was not properly armed which may have aided the Coast Guard with finding her in time.

    Doug

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