Running a growing business is never without its challenges, and as companies scale beyond the £5 million mark, those challenges often become more complex. With multiple revenue streams, service lines, or even trading entities, it becomes harder to spot what’s truly driving performance and what may be quietly dragging it down.
As a Fractional CFO working with ambitious SMEs, I often step in during a pivotal phase: when business owners and boards are asking hard questions about sustainability, margins, and long-term direction. One of the most difficult, yet sometimes necessary, conversations is around whether a particular product, service line, or even an entire entity should be wound down.
It’s a tough call, emotionally, operationally, and financially. But in many cases, it’s a strategic move that protects the business as a whole.
Why this matters for SMEs
Unlike early-stage start-ups or sole traders, SMEs with multiple divisions or legal entities often have layers of financial interdependency. One underperforming area can have a ripple effect, draining cash, distracting management, inflating overheads, or creating risk around debt covenants and banking relationships.
This is particularly true when:
- A subsidiary continues to operate at a loss with no realistic turnaround strategy
- A product or service is no longer viable in the current market
- Overheads are bloated across the group, driven by inefficiencies from legacy operations
- The business has outgrown its original structure and needs to refocus on scalable, profitable areas
Left unaddressed, these pain points can hold back growth or even threaten the sustainability of the business. That’s where timely, strategic decision-making becomes critical.
How to identify what’s no longer serving the business
Making the decision to wind down an entity or exit a service line shouldn’t be taken lightly. But it should be grounded in clear, objective analysis.
As a Fractional CFO, I typically guide business owners and boards through the following:
1. Entity or segment-level analysis
Breaking down profitability, cash flow, and debt at the entity or business unit level, not just the group position, is key. An entity may appear sustainable on paper, but once intercompany costs or shared overheads are properly allocated, a different picture can emerge.
2. Covenant and risk monitoring
Is the underperformance of one area impacting your group’s ability to meet loan covenants or maintain lender confidence? If so, swift action may be needed to prevent wider consequences.
3. Forecasting with and without
I run scenario models with clients to help them visualise what their financial position could look like with and without the entity or service line. It often becomes clear that the business would not only survive but thrive with a leaner structure.
4. Strategic alignment
Does this area of the business still align with your future direction, customer needs, or operational strengths? If not, that’s a strong signal that it may be time to step away.
The benefits of making the hard call
While it may feel like a step back in the short term, the decision to let go of an unprofitable area is often the most forward-looking action a business can take. Done correctly, it can:
- Strengthen overall profitability and cash flow
- Improve group-level reporting and management oversight
- Free up leadership time and attention for growth-focused areas
- Streamline operations and reduce internal friction
- Reassure stakeholders and funders that the business is being proactively managed
It also creates headroom, financially and mentally, to reinvest in the parts of the business that are truly scalable.
Planning for exit: What should you expect?
If a decision is made to liquidate an entity or exit a business line, the next step is detailed planning and communication. I work closely with clients and their accountants, legal teams and stakeholders to ensure the process is smooth and compliant.
This includes:
- Coordinating with insolvency professionals where needed
- Managing internal communications to reassure employees
- Restructuring intercompany balances and shared cost allocations
- Updating forecasts to reflect the new structure
- Working with external funders to manage expectations and covenant compliance
This isn’t just about cutting costs, it’s about creating clarity and building a stronger foundation for the future.
A real-world mindset: It’s not failure, it’s leadership
It’s easy to internalise the closure of a company or product line as a failure. In reality, it’s often the opposite.
Letting go of what no longer serves your business takes courage and leadership. It signals to your team, your customers, and your stakeholders that you are building a resilient business, not just chasing revenue at all costs.
How a Fractional CFO Can Help
These aren’t easy decisions, and they’re not ones you have to make alone. As a Fractional CFO, I bring external objectivity, financial rigour, and strategic insight to your leadership team. Whether embedded within your board or working alongside your in-house finance function, I help you:
- Understand your true financial position across entities and divisions
- Model different options and forecast the impact
- Create a plan of action that protects your business and unlocks growth
- Engage lenders, stakeholders, and staff with clarity and confidence
If your business is at a crossroads, or you’ve been carrying a part of the business that’s not pulling its weight, it may be time to explore what letting go could look like.
