Shrink your business

by Tim Gilbert - Wednesday, 29th August 2007

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In 2000, we had a booming £20m courier business – 165 employees, in 42 depots across the UK. The internet was going to change consumer activity forever, with more and more people shopping online and waiting at home for their deliveries.

In July 2001 we had to give up a major account and, faced with a cash crisis, we also gave up our other home-delivery business. Then we began the extraordinarily painful process of shrinking the company.

In a month, we closed all the depots and made 130 people redundant, leaving only the strong franchise sites in place. We’d been losing money for so long that we had to move fast. But we were also determined to treat our people fairly.

To each person, we explained the financial reality – that, in its current state, the business had weeks to live.

Of course, people were disappointed, but we’ve had no tribunal actions. I’m very proud of that. Some of our staff even wrote down everything that they knew about the business and its procedures, right down to passwords.

It was hideous. It felt like I was dismantling my life’s work. The most macabre moment was when all 80 computers from the branch network came back to our St Ives office. Many still had Post-It notes on, saying things such as ‘Don’t forget milk on Monday.’ But there would be no milk.

But we had to do it. And there were suddenly a lot of big liabilities kicking around. We had to have the nerve to tell the Revenue that, yes, we would pay them but they might have to wait a bit.

What have I learned from this episode?

When things start to go wrong, everyone gives up. You – the boss – have to carry people with you and wait for the moment when enough things haven’t gone wrong (or a few have gone right) that they start to believe again. 

Choose your crisis team ruthlessly. Only take the people that you really need. 

When trouble strikes, move quickly. Apparently, paralysis is a common feature among owners when businesses go bust.  

Your competitors will say that you’re finished. In response, I wrote a humorous letter to the trade press explaining that reports of our death had been exaggerated. And my business partner Martin Rutty brought in major new business when we needed it most. 

While you’re doing well, don’t reinvest every penny in the firm. Put some aside for yourself as you go along. 

Once your business is in crisis, remember that “none are so free as he who has nothing to lose.” Be imaginative. 

Everyone in the banking community says you can’t shrink a business by more than ten per cent without running out of cash. But you can – you just need to identify the really good stuff at the core of it. We’d run a really good £3m business in the past; why couldn’t we do it again? 

Never assume anything. Every last thing that you see, hear, smell or dream about your business, think about it and take it seriously. With hindsight, I should have heard customer concerns. 

And even when things are going well again, run your business as though it’s still
in crisis.

Tim Gilbert wrote this in October 2003. It's still important reading for any company facing trouble or a strategic rethink.

Tags: tim gilbert, business advice, downsizing a business, failing business,