6 Reasons For Downsizing
Every day, companies have to lay off workers and/or close whole or partial sections of their businesses or downsize. It could be a layoff of just a few people, closing an entire office, closing a location or closing statewide. These decisions are not taken lightly, or should be. Although there are many reasons why a company might choose this route, all of them relate to the financial impact that the area or the location has on the bottom-line.
1.Results lower than expected
Some locations don’t deliver the results that the business plan anticipates. A business should plan extensively before opening a new office or business location. A company may expect a certain amount of sales or financial gains from any new area or location. If the office or location fails to meet those expectations, the business might decide to close it down. This is especially true if the location is retail.
2. Economic Downturn
Sometimes, a business may experience a drop in sales or production due to the economy. Plastic containers are used to store food and other items. If the company produces plastic containers (I.e. the ones you order your fast food in), and there is a decrease in orders due to a slow economy, the plastics company could be affected. If the company is hit hard enough, this could lead to layoffs and even the closure of a business.
3. Concentrate your resources on other areas
The company can only spread its resources among its various geographical areas. Sometimes it is not a good idea to spread resources so far that resources are not available in all areas. This is when companies may decide to close one or more geographic areas to make it easier to concentrate resources in other areas.
4. Contract changes
A contract with a larger company can be a source of revenue for a business. The company acts as a “middle-man” between larger companies and smaller businesses. Any changes to the contract could have a negative impact on the company’s financial standing. Contract negotiations that don’t go according to plan or concessions made by the company can lead to layoffs or even the closure of geographic areas in order to make up for revenue lost under the contract.
5. Modifications to the Core Business
Businesses go through changes just like people. These changes may seem small or insignificant. Others can be significant and can have a profound impact on the business. The company might decide to overhaul its employees and other areas if the changes lead to a complete overhaul of the business, products, services, and brand. This is based on the target customers for the new brand.
6. Legal Challenges
Businesses have many laws that vary from one state to the next, as well as from city to city. It can be difficult to keep up, especially for businesses that operate in several states. It is important to find a business attorney who is familiar with the local areas your company operates in. If the company has legal problems, it can lead to layoffs or the closing of offices/locations and eventually the closure of the entire company.
Although there are many reasons why a company might lay off employees or close down business locations, these are the ones I have witnessed/experienced over the years. It is all about the financial success and sustainability of the business. It is not worth keeping the business running if it doesn’t make any money. This is a tough decision that must be made by anyone who is in a position to make them, but it is a necessary part for doing business.