If you have vCenter you can run a "Clone VM" action. Its just simple and easy.
If you dont have vCenter, you can follow this guide to "clone" the VM: How to Clone VMs Without vCenter in 5 Easy Steps
And to shrink the disk, take a look at this one: VMware Knowledge Base
Hope that helps!
NTriple VCIX (CMA-NV-DCV) | vExpert | MCSE | CCNA
Is this related to your ongoing mission to backup a VM?
If so, using a proper backup tool is the best answer.