When Business “Losses” Are Actually Major Wins

What if closing a profitable business, laying off good employees, or deliberately capping your growth could be the smartest moves you ever make? In this episode, Tonya Kubo and Gwen Bortner challenge the conventional wisdom that bigger always equals better in business. They share real client stories of strategic “losses” that became major wins – from closing six-figure businesses to downsizing operations – and explore why society’s pressure to constantly grow keeps entrepreneurs trapped in unsustainable situations. You’ll learn to recognize when it’s time for strategic subtraction, understand the psychology that makes these decisions difficult, and discover what actually happens when you have the courage to step backward. Sometimes the most brilliant business decision isn’t about what you’re willing to add – it’s about what you’re brave enough to subtract.

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When Business “Losses” Are Actually Major Wins

Not all business failures are true losses, which is the topic of this episode. If you’ve ever felt trapped by your own success or wondered if there could be courage in stepping backward, keep tuning in. Gwen, one thing I love about what we do here is calling out the sacred cows that give spoiled milk, those industry-wide accepted truths that are false more often than not.

While we all often hear news of closing businesses, layoffs, or constraining growth as negatives or signs of failure, that is not always the case. In fact, both of us have experienced personally and with clients where the opposite was true. Those supposed losses turned out to be big wins. I’m hoping you can kick us off with an example from your experience.

Trapped By Success: A Personal Story Of Downsizing

It’s interesting. There are dozens of examples that we have seen at various levels and in various types with our clients. As we were prepping, I gave you a story that you were like, “I don’t even know about this story,” so I’m going to start with a story about me.

Our whole relationship is a lie because I did not know about this.

As I told the story, I said, “This is probably 1990,” she’s like, “I’m not even out of high school yet.” A lot is related here to all of these things. It was back in 1990. I had my own business. I was a custom computer programmer, working on PC programming. I had been doing it out of my house back in 1990. When people say, “I’ve worked from home for a long time,” most of you have not worked from home as long as I have.

Were you doing it out of your mama’s basement?

I was not doing it from my mama’s basement. It was from my own house. I did have my own house at that point. At first, it was from my apartment. I did not have a house yet. I wanted to feel legitimate, so I rented a very small office. It was a one-person office. Quite honestly, it probably wasn’t a whole lot bigger than the room that I use from my office in my house now.

I also hired a subcontractor employee, my first employee. Business was technically going well, so I had this office. What ended up happening over time and what I discovered, which was a very long process, was that my lovely employee was stealing fax machines and computers from your alma mater and selling them as used equipment out my back door during completely off hours when I was not there. The reason I was able to find out about this is that I bought one of these pieces of equipment. The campus police had started to figure out who this person was, and they reached out to me.

I talked to them and said, “I bought this piece of equipment.” They were like, “That’s one of the stolen pieces.” I had to turn it back in because it was stolen goods. I then was able to share a couple of folks that I know he had talked to about this, but I only had a name. I didn’t have any details because it was not being sold through my business. He was doing this as an independent person, which I was okay with until I realized what he was doing.

They went to that person and found out that he had stolen equipment. They repossessed the equipment, so that guy went after me in small claims court for the money that he gave in cash at night at the back door. He even admitted that in court. I still had to pay the $800, or whatever it was, back to him, which was a lot of money at that time, even though I never saw it.

Hold on. You lost the case?

I lost the case.

Talk about burying the lead here.

It’s because I did the right thing. No good goes unpunished. I lost the case. He stopped showing up as soon as he realized what was going on. I realized, “I can’t afford to pay for this space,” so I downsized back down to just me, working at home and doing all the things. The business was so much more successful. Since I know you’ll care, I later helped the police catch him because I saw his car at the mall. I figured out where he was. I had one of my friends go spy to see if he was where he was, and then we told them, and they caught him.

Did you ever get your $800 back?

No, not a chance. It was one of those that I had grown because that was what everyone said I should do. I should grow. Quickly, I compressed back down. I would have been better off if I hadn’t grown in the first place.

Small claims court aside and criminal activity aside, looking back with that business operations hat on, why would staying small have been better?

It’s because I would not have had the expense of the lease payment and any of the other things. I don’t remember what all my expenses were. I may have had electricity that went with it, which probably wasn’t that big at the time. It was the lease payment, and it wasn’t a big, giant payment. It was a small office. This was back in the ‘90s. It was probably a few hundred dollars every month that I was paying, but I could have been putting that in my pocket.

I never had a legitimate client come to that office, not once, because I always did my work by going to their office, taking floppy disks, installing the programs that we had written, and training them at their space and on their computer. I didn’t need an office, but I thought I did because that’s what everyone said would make you legitimate. It’ll do all of those things.

All it did was cost me money. It ended up costing me way more money than it actually cost me for reasons that no one could have ever predicted in normal circumstances. There were at least several thousand dollars of lease payments that I could have avoided by not doing this. It didn’t hit me with anything at all.

Societal Pressures & Entrepreneurship: A Deeper Look

This brings us to the next point, which is this societal pressure that comes with entrepreneurship. It’s that society always has, and probably always will, equate bigger with better. It’s so hard as a business owner not to fall into that trap of believing that all growth is good growth, and that everybody you see on social media announcing the expansion of their business, opening up a new location, their first 7-figure year, their first 6-figure year, or whatever, could be are all successful because that seems like a measure of success. Nobody talks about when they have to shrink back. That’s always hidden under the surface, or they’ll talk about it after the fact that they are phoenixes rising from the ashes. How do you feel this keeps business owners stuck in unsustainable situations?

We don’t consider an alternative, like giving up the office space early enough. We get stuck in saying, “I need this.” We’ve had another client who expanded their business. They did this before they started working with me. I would’ve told them from the get-go, “Do not expand the business,” in the way that they were talking about expanding the business. They have to have a physical location for what they do, but they went from probably what was a right-sized space to a much bigger space.

The story that they get sold and everyone gets sold is, “If you have a bigger space, you can sell more.” That’s not necessarily true. You’ll just have more inventory. That doesn’t mean you’ll have more customers buying more things. They went into this much bigger space, which had a whole lot of various extra things and whatnot.

As we have been working together over time, we’ve realized that some of this space they cannot afford. There is no way that they can afford to have this space, and they don’t need it. They don’t need it to run the business. They’ve gone through the process of negotiating with their leasing agent to give up a chunk of the space so that they can get their finances right-sized.

We had to do a lot of work before they could mentally get there because they felt like this was a negative activity. They were like, “I’m going backwards.” I was like, “You’re going back to where you should be.” It’s like if you’re running in the ocean and you’re like, “I’m going to run in the ocean,” but what you’re running toward is the Jaws with its mouth open. Running backwards is a good idea. Not all forward momentum is the right moment. Sometimes, we need to stop and re-evaluate, but a lot of times, we wait until we’re practically in a Jaw’s mouth, and then we can’t get away. That thing looked like a shark way sooner.

 

Separating Decisions From Outcomes: A Key Principle

I’m curious about all of that. You said it took a while to mentally get there. What was that journey like? That would be helpful for other business owners. First of all, it’s a hard sell. It’s a hard sell for us. It’s a hard sell to others. How did that thinking process go? Take us from here to there.

The first thing I want to say before I answer that question is that this is a classic example of what Annie Duke talks about in the book, Thinking in Bets. She talks about separating the decision from the outcome. Good decisions can have good outcomes and bad outcomes. Bad decisions can also have good outcomes and bad outcomes.

Good decisions can have good outcomes and bad outcomes. Bad decisions can also have good outcomes and bad outcomes. Share on X

The thing that we struggle with is when we instinctively know we made a bad decision based on new knowledge, not necessarily old knowledge. Old knowledge is the knowledge you had when you made the decision. Was it a bad decision then? Maybe it wasn’t, but now we have new knowledge and we realize, “Given that new knowledge, that was a bad decision.” We don’t want to own that because then we think of it as a bad decision. That means, “I’m stupid. I’m incapable. I don’t know what I’m doing,” and all of that negative self-talk that comes in.

In this particular case, with the information they had, the advice they were given, and all of the things, the decision itself at that time was a good decision. There was no reason for them to believe it was going to be a bad decision. In this case, part of it was that they got bad advice, but how would they know that was bad advice? Once they realized it was a bad decision, it was like, “If I make a change, then I’m admitting I made a bad decision.” I was like, “No. That was a good decision. It’s got a bad outcome. To make it again today would be a bad decision.”

The thing that they forget is that by not taking action on it today, they’re now making a bad decision. We now have new information. We should make a new decision, but we think that whatever decision we’ve made, we have to live with. That’s the mental process and exercise that people are going through. Often, the decision they made at the time wasn’t a bad decision, but later, it feels like a bad decision because we have more information that there was no way for us to have before that moment. We beat ourselves up, and beating ourselves up prevents us from making a new decision.

Often, the decision we make wasn't bad at the time, but later it feels that way because we have more information. Then we beat ourselves up, and that self-punishment prevents us from making a new decision. Share on X

Why Closing A Business Can Be A Win

There are other examples of this with closing a business. We started this show talking about what we were seeing in the marketplace, where people were shutting down their businesses, coming back up, and sometimes building the same business a second time. It’s the fact that they weren’t talking about the closure decisions when they were happening. It was only when they were ready to relaunch or whatever that they would talk about them. Give me some examples from your experience where closing a business was a good decision versus a bad decision, or maybe a sign of winning versus a sign of losing.

There are a variety of examples, but the common theme is we are in a different season, whatever that different season is, than when we started the business. The classic example is, “I started the business before we had a family. Now, we have a family,” or “I started the business when the kids were little, and now they’re not,” or “I started the business when the kids were in school, but now we’re empty nesting.”

There has been time between this season and next season. Sometimes, it’s a relatively short time. It could be 2, 3, or 4 years. Sometimes, it’s a long time, which could be 10 or 15 years. What we realize is, “This is no longer doing what it needs to do for me as an owner. It’s taking up time that I want to put somewhere else, and so I choose to close the business.”

Often, we want to sell the business, but sometimes the business isn’t sellable for all sorts of reasons. It could be the timing of the market. It could be the type of business that it is. There are a whole bunch of things there. It could be like, “I’m closing the business.” I can’t tell you how many years ago it was, but when I was in my knitting world, there was a gal who had a yarn shop business that technically could have been sold. It 100% could have been sold. It was profitable. She had it for years. It was in a good location.

She opted to close the business because she felt strongly that she was done with this stage of her life, and she didn’t want the name associated with anyone other than her. She chose to close it instead of sell it. I have zero doubt she could have sold it, but she chose not to. She said, “I’m going to close the business.” It was a great example of, “I’m at a different stage. I know why I’m doing this. I’m not going to feel bad about it. I am not going to be a failure. I’m not seeing myself in any of these things. Life has changed.”

Laying Off Team Members & Shrinking Your Business

That’s an example of closing. What about laying off team members?

This one is always hard, particularly with the people I work with, because they tend to be strongly empathetic. It’s like, “I’m doing something horrible to another person.” That’s not always the case. A lot of times, what you’re doing is you are releasing them out into the wild to find another opportunity where they can be super successful. They’re no longer super successful with you right now.

Often, laying off people means releasing them out into the wild to find another opportunity where they can be super, super successful. Share on X

We’ve had this happen with multiple clients. What I’m thinking of is someone who helped them get the business started. They’re like, “They helped me get it started.” It’s all of those things. It’s like, “The job that you hired them for no longer exists in this business, so they’re not being successful for you. We need to release them into the wild to find another job that they can be successful at.”

There’s always this “I’m firing them. I’m laying them off. I’m letting them go,” or whatever term is appropriate and they’re using. It’s like, “They’re good people.” If they’re good people, they’re not going to have a problem getting another job. Let’s be honest. That’s the truth of it. When they finally got to it, what ended up happening was lots of tears and lots of upsetness for about 24 or 48 hours. Within less than a week, they had another job that they were excited about, which they were going to head off to. That shrinkage allowed for things to be reconfigured to then allow for new growth.

The same thing happens sometimes in the shrinkage of our business with clients. We have a whole set of clients. This happens a lot early on. We say yes to a lot of things that are not necessarily optimal long-term. We want to say yes to the client. Someone wants to hire us, and we want to say, “Yes. We will work for you.”

Over time, we realize it’s not a good fit for any of a dozen reasons. It’s not our core offer. It’s no longer the thing that we’re best at. We don’t enjoy doing it anymore. They’re not a good fit client. There are certain activities, behaviors, or whatever that they’re not a good fit. There are a dozen reasons why we may need to shrink our clients down, which will undoubtedly shrink our business, so that we can make space for the good fits and for the things that do fit and are the type of work that we want to do going forward.

What ended up happening, and this was how we started the show way back when, is that so many people needed to do that, but instead of trying to do it strategically, they burned it to the ground and started over. That is not the only option. That is not the only way to do it. There are lots of ways to do this, but you also have to be prepared. It’s going to screw with your income and make some changes there, but often, the other side of that particular dip is way higher than where you came in at.

One example from my own business is that prior to 2020, most of my work and my steady income came from running book launch teams. Usually, I would be running 20 to 30 launch teams per year. It’s a great income, and it keeps me busy. I was not enjoying it toward the end there, but it was reliable, easy to market, and easy to sell. Everybody was like, “This is the wave of the future,” so I stuck with it.

The pandemic hit, and a lot of publishers pushed pause on projects. All of my clients hit pause. It was during that time in 2020. We did end up launching maybe 3 or 4 books that year. It helped me to go, “This is why I don’t love it.” One of the reasons I didn’t love it is that, in the time that I had been running launch teams, the market shifted from publishers paying launch team managers to publishers requiring authors to pay launch team managers.

That minimizes the amount of money you could charge, but it’s also an unfairly added risk to the author. Authors already very rarely earn out their books, so to have the author pay a bunch of money toward a launch team didn’t make sense. That period of time in 2020, where technically some would say, “Tonya lost all her clients,” it was the best thing that could have happened for me because it was a great way to pivot my business and not have to fire clients. They were so grateful not to have the financial liability to me, and I was able to give them great advice on how to redirect those funds differently.

When Business Failure Fuels Innovation And Growth

That whole failure is okay. I also have a number of success stories that we can talk about that would be more traditional successes. I look at the traditional successes and what I would call traditional failures as the same level of success.

You’re going to have to explain that.

When I’m able to help someone see that the reason that they’re miserable in their business is because 75% of their clients are not their best fit clients, they’ve just been saying yes out of fear or desperation, and they end up firing all those clients and cutting their income by 75%, I see that as a win because it opens up the space for them to only have a best fit client.

I had one of these several years ago, where this was the thing. She came to me. She had this nice, solid six-figure business. By the time we had done most of our work, it was barely hitting six figures, if not under six figures, but it opened up the space for her to only say yes to those perfect-fit clients. In the following year, a couple of things happened. One was that she had a whole lot of bizarre, weird personal things that she had to deal with. If she had that on top of all of these less-than-optimal clients, I’m not sure mentally she would’ve made it, quite honestly. It was too much.

She was able to mentally deal with all of this other personal stuff she had to deal with. As she came out of that, she was prepared to only take her best-fit clients. She is in an awesome place now. She is so excited about who her clients are, what her business is, and who she is working with. All of the love and joy that she had when she started the business has completely regenerated back into the business.

I consider being able to help her go down to this barely surviving business a win as well because that’s way harder to do than to help someone double their business, triple their business, 10x their business, or whatever. You’re helping them do the truly hard thing. It’s what they want but are afraid to say. We’ve done the same thing with other clients where the hard thing is, “I don’t need to make money. What I want to do is spend time with my children and to be okay with, ‘Let’s not have the business now.’” That doesn’t meet normal society standards of what success looks like.

If your true definition of success is spending quality time with your children while they’re under the age of 18, then why are we working at building a business that’s going from taking 30 hours a week to 40 to 50 to 60 to 80 hours of your time? We’re not moving you towards success. We’re moving you toward failure. In this case, moving the business to shutting is a movement to success, but it’s back to how we define success differently. Part of the way we define it differently is that I don’t define it at all for you.

We define success differently; no one can define it for you at all. Share on X

How does that work?

Defining Success Beyond Societal Norms

Ask the question differently.

You said part of how it works is that we don’t define success for you. What I’m trying to understand is that we don’t define it for you, which oftentimes means it’s defined by society, but society is sending this toxic message. How do we make that shift to get clear into what I want without somebody else defining it for me?

This is why I don’t ever expect us to do short work with our people. We’ve talked about it before. I have no minimum contract because if they don’t feel like they’re getting what they need, I don’t want them to stay working with me. I’m completely okay with that. At the same time, I also know that deprogramming what society has defined as success takes time.

It’s like de-coaching.

It’s like anti-coaching. It’s helping ask hard questions to say, “You’re saying that you want this. Tell me why you want this,” and being able to have enough conversation with it to say, “You’re saying that, but I’m not buying it. You’re saying that because that’s the easy answer. Let’s go into it more. Tell me why that easy answer is your real answer,” usually, what we discover is, “I can’t tell you why I want that answer because it is the easy answer. It’s what I’ve been told I’m supposed to want.”

I know we’ve shared it before. One of my clients from a number of years ago wanted to be a top litigation attorney. Since I happen to know her personally, it was like, “This makes zero sense to me. There’s nothing about your personality that says top litigation attorney. It’s not that there’s anything wrong with being a top litigation attorney. That’s great if that’s who you are and what you want to do, but I’m not convinced that’s right.”

Part of what we were dealing with deprogramming is that we always associate the most successful attorneys with litigation, even though there are a bazillion types of attorneys out there that can be very successful. What we associate with success is litigation. There was almost nothing about litigation other than that she’s good at arguing a point. All of the other stuff that goes with litigation, such as the paperwork, the filing, and the back and forth, there was almost nothing about that that she was good at or liked doing.

We finally broke through that, which took a long time, quite honestly. It took a long time to undo that and help her figure out where else she could be successful. Once she found the area where she was successful, when she stumbled on it, it was like, “That’s it,” because it matched her personality so much better. In this case, it was estate planning and creating a trust. What she’s great at is the relationship with people and making people feel at home and comfortable so fast. What a great skill to have in trust and estate planning. It made perfect sense. Her business became so much more successful.

She also had kids. She wanted to be able to spend time with kids. Litigation causes weird hours. You have less control over what you’re doing. She hardly ever has to go to the courthouse for estate and trust planning. If she wants to take a day and go be the chaperone for her kids’ event at school, she can do There is so much more flexibility. Once we got to what real success was, we were able to do that. A lot of people would say, “She gave up some big, important clients.” Yeah, but they were also a pain in the butt.

The Psychology of Business Subtraction and Growth

It sounds like, to me, there are two challenges that any business owner would face in making these decisions. Part of it is societal pressure. In the case of the attorney, everybody is like, “You would have gotten these big clients. You probably would be making so much more money as a litigator than you are now.” There’s that piece. The other piece is that there’s also a psychology component. Some things that I heard you say are that there can be an ego attachment to business size or business complexity. Sometimes, we enmesh our identity and our self-worth with our business.

You think that sometimes is the appropriate amount? I would say most times. I can’t quite say always because I’m sure there’s an exception, but it’s probably close to always.

There’s the ego attachment to business size and complexity. You talked a bit about that sunk cost fallacy that keeps you invested in what’s very obviously not working for most people, and yet still, we are in complete denial. There’s the fear of judgment from peers and other people in the industry. A lot of times, it’s like, “What will my competitor think?” or “What will so-and-so think?”

There’s the imposter syndrome that you pointed out in the one example of regardless of what you want, you should want something else. That’s the psychology piece. If there’s a business owner who’s like, “I didn’t know that’s what I needed to do. I need to make some cuts. I need to do some trimming,” what could you tell them to expect to happen when they start making these moves?

I have seen this again and again. This is woo, and I can’t define it. I can’t explain it. I can’t say I’ve seen it exactly the same way and 100%, but I see it so much. The first thing that’ll happen is it’ll be hard, and everybody wants to scramble back to whatever their comfort zone is. Their comfort zone is whatever they were doing before, even if it didn’t make them happy. It’s still their comfort zone.

I get this quote wrong all the time. Nick uses it. I can’t remember the gal’s name, but it’s around the idea that people prefer the comfort of uncertainty versus the certainty of discomfort. It’s like, “I’d rather be miserable.” It’s the certainty of misery rather than the uncertainty of the possibility.  They’re like, “I would rather be miserable and know what’s going to happen than take the risk to try the new thing or do the thing that needs to move forward.” That is the first thing we have to deal with.

We get into this very uncomfortable place, and the first thing we want to do is regress. If we can stay in the uncomfortable place, the next thing I see happen is that the universe will dangle something that represents the comfortable place in front of you. As soon as you clear out two or three of your bad clients, the universe will dangle another bad client in front of you with a giant price tag attached to it, whatever that thing is, and it’s like, “I’ve got to say yes.”

I always feel like it’s the universe saying, “Are you serious about making the change? I’m testing to see whether you are serious about making the change.” If you can resist the temptation, which is what it feels like, almost always, and it sometimes takes longer than others, all of the right things start showing up. The temptation piece is that. If we bite, then we’ve got to start the whole process over again. That is the hardest piece.

If you can resist the temptation, almost always, the right things start showing up. It sometimes takes longer than others. Share on X

Thinking back to the attorney-client, once she made the decision, there were a couple of things that fell in, and I kept saying, “The answer is no.” She was like, “They’re good friends. They’re this. They’re that.” It delayed her making the process probably by another year, even though it was only one or two. It wasn’t like there were dozens. She still had some that she had that were already in process that she had to finish. She wasn’t talking about that. It was the new thing here and the new thing there.

Finally, at one point, she said, “I had them come in and I said no.” I was like, “Yay.” Soon after that, all of a sudden, the floodgates opened on the other work. Up until then, she was like, “I’m not getting very many.” A few other things shifted. She had a couple of different opportunities and a couple of PR situations that opened the floodgates once she did not take the bait. That’s just one example. I’ve seen it again and again.

Thank you for wrapping up the bow around that for us. This has been eye-opening for me, because as much as I knew about a lot of these scenarios, hearing them all presented in a single package has been enlightening. That’s when you see how much these psychological factors play in and how much other people’s opinions of what we do and how we do it skew our own thinking on what we need to be doing to move forward. If you are feeling trapped by your own business success or wondering if it’s time to make some strategic subtractions, I bet Gwen has something to say about that.

Advisory Work: The Unbiased Outside Perspective

I do. This is why I call my work advisory work because I’m coming in like a board of advisors or a board of directors. I’m bringing in an outside perspective that doesn’t have any skin in the game, so I can give you a much more impartial version, but I still care about your outcome. That’s what you need in these kinds of situations. It’s that ability to have someone without an outside perspective, but without so much skin in the game that it’s skewed. That’s where a lot of people struggle with it. They’re getting a skewed perspective on what’s coming in, that outside perspective, and the ability to ask the hard question.

I’ve had more than one clarity call, which I know is what you’re going to invite people to do. I’ve been on the call for 15 or 20 minutes at a point that I feel comfortable saying, “I’m going to ask you a hard question if you’re okay with that.” They say yes, and I ask the hard question, and then they’re like, “That solved everything.” I then don’t hear from them ever again.

That’s a win.

They needed someone to say the thing that they’ve been thinking about and they know in their heart, but everyone else is saying, “That’s not true.”

To that point, you did a great job of explaining what the clarity calls are. What I would say is clarity calls, in general, are not about convincing you to blow everything up. I’ve sat on enough of them to know this is true. They’re not about telling you what you have to do. It’s helping you figure out what business decisions work for the life you want.

If you want to book that appointment with Gwen, you go to EverydayEffectiveness.com/clarity. As she said, she may never hear from you again, and she’s okay with that. It’s not a sales pitch. It’s simply a conversation to figure out what the best next step is for you so that you don’t wake up the day after hating your business. Nobody wins when you’re miserable.

 

Mentioned in This Episode

• Thinking in Bets by Annie Duke
• Book a 30-Minute Clarity Call with Gwen Bortner
• The Business You Really Want on Apple Podcasts

 

About Your Hosts

Gwen Bortner has spent four decades advising executives and entrepreneurs in 45+ industries. She helps women succeed in business without sacrificing happiness by identifying their true desires and aligning their business functions. She spots overlooked bottlenecks and crafts efficient plans toward sustainable success that center your values and priorities. Known for her unique approach to problem-solving and accountability through the G.E.A.R.S. framework, Gwen empowers clients to achieve their definition of success without sacrificing what matters most.

Tonya Kubo is a marketing strategist and community builder who helps entrepreneurs build thriving online communities. As co-host of The Business You Really Want and Chief Marketing and Operations Officer (CMOO) at Everyday Effectiveness, she keeps conversations on track and ensures complex business concepts are accessible to everyone. A master facilitator with 18+ years of experience in online community building, Tonya takes a people-first approach to marketing and centers the human experience in all she does.