The government announced last week that the UK Space Agency will be wound up as an independent body and absorbed into the Department for Science, Innovation and Technology. A key reason for the decision was to save costs.
While few of us are running space agencies, the principle is the same for businesses of all sizes: sometimes it makes sense to step back and ask whether each part of the business is still pulling its weight.
One of the departments in your business, or a service line you offer, might be expensive to run while not creating enough return. This could be because demand has fallen, or because the overheads involved – staff, premises, stock, administration – outweigh the income.
For example, a café might realise that a complicated dish on its menu is rarely ordered, yet takes up staff time, ingredients and storage space. By removing it, the café can focus on less time-consuming, more profitable items.
As businesses grow, it’s common for overlap to creep in. Perhaps two teams are doing similar work, or two products are targeting the same customer need. Removing duplication can free up resources to focus on the most profitable activities.
Just because something has been part of the business for years doesn’t mean it fits the business needs of the future. You might find that your business is gradually shifting towards one type of client or service. If so, it may be better to let go of areas that no longer fit with that.
Sometimes the issue isn’t cost or duplication, but clarity. Bringing a function under closer control can improve decision-making and accountability. This might mean centralising a service rather than scrapping it altogether.
What practical steps could you take?
- Regularly review your profit margins by service line, product or department.
- Be alert to hidden costs, such as staff time, storage or administration costs.
- Ask whether a service or product still fits your long-term goals.
- Consider whether the work could be done more efficiently elsewhere in the business.
The decision to close a part of your business can be difficult, especially if it has a history or loyal customers. But like the government’s reasoning with the Space Agency, sometimes it’s the right move to save costs, sharpen focus and avoid spreading yourself too thin.
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If you would like help assessing your business’s strategy or setting up a system that allows you to monitor performance, please get in touch. We would be happy to help you!
