Downsizing may not be the best strategy to save your business post-covid19

The new normal is upon us.

Based on all accounts it will not be an easy time. There is a recession coming. The US economy is still locked down and there are currently no tourist allowed into The Bahamas.

In this environment, many businesses have to suspend operations and/or downsize to survive. This is the accepted strategy.

However, I just read an article from Harvard Business Review that showed some interesting data.

We found that downsizing firms were twice as likely to declare bankruptcy as firms that did not downsize. While downsizing may be capable of producing positive outcomes, such as saving money in the short term, it puts firms on a negative path that makes bankruptcy more likely. While not always fatal, downsizing does increase the chances that a firm will declare bankruptcy in the future.

This study was based on the data from 4817 companies that went through the 2008 recession.

While I’m not going to suggest that you follow this study, this did make me think.

Check out the full article here and form your own opinion.

As for me, I believe companies should not quickly accept that business will decrease and instead take a closer look at their marketing and sales efforts.

Be creative. Be competitive. Build systems in your business that get you more customers and sales. Now is not the time to shrink and wait it out, its the time to get aggressive!


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