As fear and uncertainty from the 2020 Pandemic eased for labor-driven businesses in the trades, owners and general managers began to look for ways to grow their business. This could be through new lines of service or completely new trades added into their company as an opportunity for vertical integration.
For many business owners, the addition of services is an answer to growing their business and they enjoy the challenges this creates. However, some businesses may improve by simplifying the trades they perform and focusing on their key strengths or specializations.
According to a study by the University of Virginia, people consider removing items to improve a system (or business) only 41% of the time. If prompted to think about removing unnecessary obstacles as a solution, people choose an easier path of removing complexity 60% of the time. As a small business owner or leader, you have the capacity to think about subtraction as a solution. In the future, I would encourage you to use this article as a nudge to think about subtraction first.
You probably practice it often. Recalling the last time someone suggested adding an overhead position, it’s likely that your first reaction was to solve the problem without adding dollars to your income statement. Many leaders will continue to reject the need to add necessary positions or other beneficial overhead items well beyond the initial need, until the position or tool becomes critical. As a more regular practice, managers work to accomplish tasks by using less time, money, and manpower. Each individual job represents an opportunity for subtraction and potential savings to increase the bottom line of profitability.
Consider for a moment what could happen if you discipline your thinking to consider resisting overhead and use the same process to grow your business by subtraction. Instead of adding lines of business or other entire businesses to your portfolio, could you run a happy, very profitable smaller business instead and still achieve your goals?
Running $10 million in revenue at 10% net profit is the same as running a $5 million revenue company at 20% net profit but with less stress and likely more cash flow. It’s a math problem about providing the most benefit to the business, resulting in dollars that can be utilized for training, development, and the pursuit of business achievements.
Working in trades-adjacent businesses for the last 15 years provides me with a perspective as to which business owners are the happiest. In most companies, owners and managers are happier with a smaller, simpler business that provides maximum benefit. The following five improvements happen in these businesses as they look to add by subtracting unnecessary tasks.
The business can focus on a specific area or niche that consumes the fewest resources. This is often the unstated goal of a business, but it is their reason for existence—to create profit to improve lives. Certainly, the person who owns the business improves their life. In addition, people working in the business can improve their skills, value, and quality of life through advancement in the niche.
A smaller business has more flexibility and can adapt to the market faster than a more complex business with more overhead. Decisions are made quicker by a small number of people, as usually one to four leaders in the business can make a change to how it operates. Whether this is a sales and marketing change, or an operational improvement, planning, communication, and implementation of the change can happen in a matter of days or even hours if necessary.
By contrast, think about the large businesses you have operated in or around and the number of approvals needed. This combined with the time to digest information and come to a final agreement to move forward can take months. Being flexible might mean that you are first to the market with an improvement to your service or a customized experience.
You can stay better connected to your customers. A smaller, presumably more profitable business can spend more time in the feedback loop that should exist with their current or prospective customers. In addition to possible customized offerings mentioned above, a small business can adjust its overall services to meet market trends, utilize new technologies, follow your target audience as their tastes and requirements change, and only pursue those ideas that improve customer satisfaction.
More risks can be taken. A new idea—even a good one—is less likely to make it in a larger business because it costs too much to initiate the change. Quite simply, you must teach many people a new way to operate and if you decide that the new idea does not work, changing back to the old way of operating can be difficult for employees and managers.
As the market changes you can respond swiftly to shifts that affect the business. In a smaller model there are fewer layers of decision making and potentially a more connected ownership that can quickly capitalize on new opportunities. Strategies can be adapted to take advantage of new requirements from the market, allowing you to offer the solution quicker than your counterparts.
Ultimately, more is not always more. Leaders should consider the potential outcome of simplifying their business and whether it is possible to make more profit with less stress than would come from a strategy of growth. Work to solve the problem of adding profitably to your business by removing complexity and then scale up from there if you feel the need.
Chris McQueen
Chris McQueen is a Business Development Advisor for Violand Management Associates (VMA), a highly respected consulting company in the restoration and cleaning industries. Chris is a veteran of the restoration industry, having worked as an independent claims adjuster, estimate reviewer, and district manager for the world’s largest independent claims management company. Through Violand, Chris works with companies to develop their people and their profits. To reach him, visit Violand.com or call (330) 966-0700
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