Having to manage a business through difficult decisions is the last thing anyone really wants to do. It is the opposite of all the exciting things like getting started, developing new ideas and growing and developing. But the sad reality is that often, for whatever reason, businesses do need to become smaller to survive. COVID-19 has been an unexpected and unwelcome challenge, it requires us to think again, just when we thought business was already difficult enough.
The fallout of the COVID-19 crisis will create a different world for so many of us for years to come. And these extraordinary conditions will require us to an even sharper focus on the characteristics of our businesses, including their size. This could result in growth in some or all areas, but a consequence could be businesses becoming smaller so they are sustainable, and ready and prepared for scalable growth when the time is right.
What gets in the way is too many people, books and training courses are narrow-mindedly focused on start-up or business development and growth. When did you last see a business book on the shelves that was all about being smaller? There should be many more, at least the same amount as the rest. It might explain why the self-styled start-up and growth ‘gurus’ appear to have gone quiet recently. The need to reduce, restructure and recover is not viewed in the same positive and value-laden terms.
COVID-19 has changed everything: our ability to deliver; our workforce’s availability; and our customers’ needs, demands and preferences. For some there have been opportunities, demand for their businesses has grown, whilst for many it has dwindled or disappeared altogether. At the supermarket click and collect the friendly staff member told me business “was like Christmas everyday”. And then there’s the boom for makers and suppliers of PPE and perspex screens. Deliveroo riders have never looked busier. On the other hand, many businesses, like hairdressers have been unable to open due to government restrictions.
This has got me thinking again if size matters in business. See my blog: Bigger isn’t always better https://workstylelifestyle.blog/2020/05/01/bigger-isnt-always-better/ In that blog I highlighted the tendency for individual members of a group to become increasingly less productive as the size of their group increases; the Ringelmann Effect (1913). It is a useful counter-argument to those who believe big is always better. It isn’t. Instead, Ringelmann points out how effectiveness and business performance can improve by getting smaller.
Recent times have caused us all to have concerns about our businesses and to rethink them – across all sectors. In early years and childcare, we are in the frontline of anticipating and meeting children and families’ massively changing needs, whilst grappling with the realities of finance and business. Parental preferences are changing enormously. They are grappling with multiple considerations: health and safety and wellbeing; employment and economics changes; different affordability; new thinking about the type of setting (group or home-based); and new household routines. The result is that need and demand could be much smaller in the short to medium terms than what we were used to before. Which means many of us will need to learn to let go, release the vanity and pride attached to scale, and make some difficult and realistic decisions.
A well-known phrase is: turnover is vanity, profit is sanity, cash is reality. After 20 years in business, I believe this is useful, with some justification. Being in the private sector (I have worked in the charity, voluntary and public sector before) I am well-used to the unfair accusation of being exclusively motivated by profit. I am not. This of course is not only a simplistic view; it does not acknowledge we all have business missions and morals. What we do is much more important than how much we do. However, I am sure everyone in business appreciates the peace of mind and opportunities that money in the bank, generated by profit, offers the business. And none of us should forget the ability to build profits or reserves has been significantly under pressure for the past 10 years after the financial crisis and throughout the period of austerity. We have already been operating under extraordinary pressure.
There are five questions any business should ask and answer to support a new smaller direction:
- What were things like before?
- What is happening now?
- What do we think could or should happen next?
- How do we scale down to remain sustainable?
- What needs to be in place to enable effective scalable increases again?
Becoming smaller is not easy. It can necessitate difficult choices. Let’s shed the ego-driven fascination with expansion and be more interested in being better, more effective and positively impactful. In COVID-19 recovery we need to ensure we are focused on the now, by being prepared to be smaller now or for the foreseeable future, before the next opportunity and our ability for sustainable scalability recovers again.