AmiSight 9/3: When Getting Smaller Is Smarter

I recently led a workshop for a group of entrepreneurs and talked about the different stages businesses go through. I used the analogy of driving a stick shift. In the early days, you’re in first gear, doing almost everything yourself and just trying to get the business moving. As things start working, you move through the gears. You hire people, build systems, create more repeatability, and eventually build a company that becomes less dependent on you.

One entrepreneur in the group stopped me and asked a question that has stuck with me. His business had grown and matured, and he felt like he had made it to what I was calling third gear. But now the environment around him was changing. Tariffs, geopolitical uncertainty, and changes in his market were pressuring some of the assumptions he had built the business around. I don’t know the specifics of what was happening inside his company, but I understood his question immediately: Is it okay to go back to second gear?

The more I thought about his question, the more I realized how hard that can be for entrepreneurs to accept. Think about a company that has spent years importing a key component from overseas. The model works, demand grows, and margins are healthy, so the entrepreneur does what most of us would do. He hires people, adds warehouse space, invests in systems, carries more inventory, and builds the infrastructure to support a bigger company. None of those decisions is a mistake. They are exactly what growth required at the time.

Then tariffs change, and that key component suddenly costs 30 percent more. Shipping disruptions may also occur, or uncertainty may rise about whether another tariff increase is coming. Customers will absorb some of the increase, but not all of it. Margins start getting squeezed, orders slow down, and the cost structure that made perfect sense two years ago no longer fits the business today.

This is where things get difficult. Keep reading for my answer, and why it applies to more than just his business.

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