Shrink To Grow

Happy Friday everyone. I’m back in my mobile filming studio, and I just wanted to shoot this very quick video to wrap up the week. Today’s topic is about “shrinking to grow”, and what do I mean by that?

So, this came about through a conversation that I had with a client during the week. This client – I won’t give you too much details, but it’s quite a large business, they employ about 50 staff, they have contracts with larger customers and they contract out services to others who then they manage to do the work.

And what we’re finding in the business is that the overall profitability of the business is suffering because of the volume of work that they’re doing that is just not profitable, or just not making enough money on it. So, I’m trying to explain to the owner that it’s not about the Top Line, it’s not about trying to win more work to try to make more money if that work isn’t worth doing and isn’t profitable.

And I’ve done this with a lot of clients in the past, where we’ve actually shrunk the revenue and picking and choosing the sort of work we do – work out which work is more profitable and actually shrink the revenue, shrink the business, and that may mean shedding staff as part of that,
to really tighten up the business and make sure that it can make better money, and then get stable, build up reserves and then grow from there.

But then grow selectively and always keep in mind the profitability of the work. So, it’s the type of work, the type of customer, really understanding what makes the business money. And I understand that it’s not always all about money, but it helps. Obviously, if the business can be profitable then you can select whether or not you do work that is a little bit more charitable, or that you’re not making as much money on. But you can only really do that comfortably if you know that the core business and the core work is profitable.

So, really understand what parts of the business, what types of customers, what type of work is really the profitable work, and don’t be afraid of shrinking the business to become more profitable, and that may mean shedding staff in the short term, but it’s going to make you a lot more stable, a lot more financially strong, which will then allow you to grow and employ people in a more stable way going forward.

So, that’s my message for this week. It’s all about “shrinking to grow”, and to grow sustainably into the future and longer-term. Have a fantastic weekend everyone, and I will speak to you all very soon.

By Anil Puri

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