Cutting Ties Smartly: How to Gently Ditch Losing Businesses

Let’s face it: every business leader eventually hits that tough spot. You realise a part of your business, or even a whole market you’re in, just isn’t making money. It’s like having a leaky faucet – drip, drip, drip, and before you know it, you’ve wasted a lot of water. This guide, “Cutting Ties Smartly: How to Gently Ditch Losing Businesses,” shows you how to turn off that faucet without flooding the whole house. It’s all about smart exits.

Why Holding Onto Losers is a Losing Game

Keeping a part of your business that’s losing money isn’t just a minor annoyance; it’s a big problem. It sucks up cash, time, and the best people who could be working on things that actually make you money. If you ignore these losing parts, they’ll drag down your whole company. Learning how to make smart exits is a real sign of strong leadership.

1. The Big Problem: Why We Don’t Let Go Sooner

The main reason companies hang onto failing parts is simple: it’s hard to let go. You might feel sentimental, worried about losing a bit of money in the short term, or face pushback from your team. But doing nothing costs you way more in the long run. These losing parts often hog way too many resources, leading to:

• Less Profit Overall: Your good businesses look worse because of the bad ones.
• Wasted Resources: Money, people, and your attention get stuck, keeping you from investing in better opportunities.
• Damaged Reputation: Being linked to a failing product or service can make your brand look bad.
• Missed Opportunities: You pass up chances to grow because you’re busy propping up a losing cause.

2. The Proof is in the Numbers: Why Smart Exits Matter

It’s 2025, and businesses need to be quick and efficient. Numbers consistently show how much dead weight unprofitable parts are. For example, a study from PwC in 2024 found that companies that regularly trim their businesses actually saw their shareholder returns go up by about 2-3% more than others over five years. Also, a recent report from Deloitte (early 2025) showed that companies that bravely sold off their failing parts were 15% more likely to see their main businesses grow within two years.

Think about it: if a part of your business is losing 5% on $50 million in sales each year, that’s $2.5 million down the drain annually. Over five years, that’s a $12.5 million loss, not even counting what else you could have done with that money. Numbers from Bloomberg in 2025 keep showing that companies with fewer, more focused businesses have more cash coming in and investors trust them more. This all points to one thing: making smart exits is key to success.

As one of our top experts in looking at what markets make sense says, “The best companies in 2025 aren’t just about getting bigger; they’re about getting bigger profitably. And often, that means having the guts to cut things out.” Business leaders often talk about “surgical strikes” – precise cuts – instead of just waiting to see what happens.

3. Real-Life Example: Old Newspapers Going Digital

Think about how old-school newspapers struggled when everything went digital. Many held onto their fading print ads and expensive delivery systems for too long. Some went out of business, but others, like The New York Times, survived and even thrived. They made the hard choice to significantly cut or get rid of their money-losing print operations, letting go of many employees and closing printing plants, all to pour money into online subscriptions and digital content. This was a clear example of making a smart exit, painful but ultimately saving their business.

4. The Game Plan: How to Make Your Exit Smooth

Getting out of an unprofitable business needs a clear, step-by-step plan.

• Step 1: Figure Out What’s Really Losing Money

1. Dig Deep: Don’t just look at the top line. Really dig into the details: how much money is coming in, how much it costs directly, how much overhead it uses, how much value your customers bring over time, and what’s happening with its market share. Find out exactly where the money is disappearing.
2. Does it Still Fit? Does this part of your business still make sense for your long-term goals, your main strengths, and where you want to be in the market? If not, there’s less reason to keep it.
3. What if?: Think about different ways to get out: selling it outright, slowly shutting it down, selling only part of it, or changing it completely. Figure out what each option means for your money, like potential losses or costs to pay people off, and how it will affect the rest of your business.
4. Who Gets Hit? Figure out who will be affected your employees, customers, suppliers, investors, and even the local community. Knowing this helps you plan how to help them.

• Step 2: Plan Everything and Talk it Out

1. Detailed Exit Plan: You need a clear plan covering legal stuff, money matters, daily operations, your team, and how you’ll talk to everyone. Assign who’s responsible for what and when it needs to be done.
2. Be Open and Honest: Talk clearly and with understanding. For employees, explain what support they’ll get (like severance pay or help finding new jobs). For customers, explain the change and offer other options if you can. For suppliers, finish your agreements and keep a good relationship.
3. Follow the Rules: Make sure everything you do follows labor laws, contracts, and industry rules. Get legal advice early.

• Step 3: Make the Exit Happen, Carefully

1. Slow Down (Sometimes): If it makes sense, a gradual exit can make things smoother, giving customers time to move to other options or allowing you to sell assets more easily.
2. Handle Your Stuff: Systematically sell off physical items, patents, and products. Try to get the most money back.
3. Help Your Team: Give plenty of support to employees who are affected. Treating people well protects your company’s image and keeps morale up for the remaining team.
4. Keep Your Customers: Try to keep your important customers for your other businesses. If you have to move them to another company, make it as easy as possible.
5. Watch Closely: Keep an eye on how things are going during the exit to make sure you’re sticking to the plan and to spot any unexpected problems.

• Step 4: After the Exit: Learn and Reinvest

1. Move Your Money and People: Quickly put the money, people, and leadership focus from the old business into your good, profitable businesses. This is where making smart exits really pays off.
2. Learn Your Lessons: Look back at what happened. What did you learn from that business failing and from the exit process itself? This helps you make better decisions in the future and become a more flexible company.
3. Maybe Come Back Later? If the market gets better or new tech comes out, think about if and how you might get back into that area, but only after a very careful look.

5. Looking Ahead: Always Tidy Up Your Business

The future means constantly making sure your business is in top shape, not just doing big clean-ups once in a while. We expect companies to use data more and more to spot problems earlier and to be faster at making exits. With AI and smart predictions, companies will be able to see market changes and competition much more clearly, making smart exits something you do before a problem even starts, not just after. Expect to see more “sunset clauses” in new business deals – built-in rules for when to shut things down.

What You Need to Do Now

• Regular Check-ups: Make looking at all parts of your business a regular, important part of your planning.
• Think “Exit”: Change how your company thinks. Instead of fearing exits, see them as necessary tools for growth.
• Use Data: Invest in good ways to analyse information so you can clearly see what’s losing money.
• Care for Your People: Being kind and fair during exits helps your team and keeps your good name.
• Reinvest Quickly: Make sure the money and people you free up from losing ventures go right into areas where you can grow.

Your Path to Stronger Growth: Let’s Talk Smart Exits

Getting rid of an unprofitable part of your business is never easy, but it’s crucial for long-term success. It takes guts, clear thinking, and a well-thought-out plan. Don’t let fear keep you stuck. Use smart exits as a powerful way to create value.