It happens every day: companies lay off employees and / or close partial or entire sections of their business, or downsize. The closure can be anything from the layoff of some employees, to the closure of an office or location, or even the complete closure of an entire geographic area. I can assure you that these decisions are never made lightly (or at least they shouldn’t be). There are a few reasons why a business may go this route, but all the reasons relate to the financial impact the area or location has on the bottom line of the business.
1. Results lower than expected
Some business locations simply do not produce the results that the business plan expects. Typically, a business plans extensively when opening a new business location, office, or area. The business expects a certain amount of sales or a certain financial gain from any area or location, and if the location or office does not produce the expected results, the business may choose to close it. This is especially true when it comes to a retail establishment.
2. Economic recession
Sometimes a business faces a decline in sales or production due to the economy. If the company produces plastic packaging (that is, the type in which you buy your fast food), for example, and the company has a low number of orders due to a slow economy in the fast food industry, the company plastics will suffer from this. This could initiate layoffs or even the closure of a location if the impact is great enough for the business.
3. Concentrate resources in other areas
A company only has so many resources that it can distribute among its different geographic areas. Sometimes it does not make sense to distribute resources so far that there are not enough resources for all areas. These are the times when a company may choose to close one or more geographic areas to allow resources to be more concentrated in other areas.
4. Contract changes
If a business depends on a contract with a larger business for its revenue (i.e. the business is a ‘middle man’ between a larger business and consumers or other smaller businesses), changes to the contract can affect the status financial company. If contract negotiations don’t go as planned, or if some concessions had to be made to save the company, this can result in a small or large number of layoffs and possibly the closure of geographic areas to offset the revenue that was they lost on the contract. .
5. Changes in the core business
Like people, companies go through change. These changes can be small and seem insignificant, and some can be large and extremely significant. If the changes result in a review of the business, services, products and brand, then the company can (usually) decide to review the employees and the areas in which it is located based on the target customers of the new brand. .
6. Legal challenges
There are tons of laws for businesses that differ from state to state, and even city to city. These can be difficult to keep up with, especially for companies doing business in multiple states. That is why it is good to have a good business attorney who is knowledgeable in the areas in which the business operates. However, if the business experiences legal trouble, it could result in layoffs, office / location closings, and ultimately the bankruptcy of the entire business in some cases.
There are many other reasons why a company would lay off employees, close geographic areas, and even go out of business, but these are the reasons that I have seen / experienced over the years. At the end of the day, it’s all about the financial success of the business. If the business is not making money, then there is no reason to keep it running. As I said before, this is always a difficult decision for anyone who is in a position to make these decisions, but it is a necessary part of doing business.
