How to Save a Failing Business?
In business, you don’t need a compass to know north from south. It’s easy to tell when your company is failing. Figuring out how to turn it around, though, can be a lot more complicated. Here’s how to get started.
As different as industries can be, there is one common thread that unites all of us – the ability to fail. The majority of small businesses do not become Amazon. In fact, a lot of them close for good within the first 18 months. Here are some of the most common reasons:
- Can’t find money
- Underestimate costs
- Suffer one big mistake
- Not charging enough
- Not hiring the right people
- Not having the right advisors
- Not having an accountant
- Lack of capital
- Trying to do many things at once
- Wrong partners
- Poor understanding of market needs
- Poor people management, financial management, and time management
- Not being focused
- Not having a pricing strategy
Many of the companies that end up being successful also suffer these same setbacks. Often, the difference is better management, faithful investors, and luck. Of course, it would be unwise to rely on luck, but small businesses can prepare for success by making sure the money keeps flowing in early on and avoiding as many mistakes as possible.
How to Save a Business
Are you thinking to yourself, “Why is my business failing? What can I do?” There are answers. While pulling a company from the brink is difficult, it is sometimes possible. Here are some tips for those who aren’t ready to give up hope when small business failure seems imminent.
Reassess Your Business Model
When Andrew Carnegie addressed the students of Curry Commercial College, he told them, “’Don’t put all your eggs in one basket’ is all wrong. I tell you ‘put all your eggs in one basket, and then watch that basket.’”
He further explained that the “one fault of the American businessman is lack of concentration.”
Are you trying to do too much? Maybe it’s time to reassess your business model and move your resources into a single area where you know you can excel.
Look for untapped markets that your skills would make sense for, and then adapt to that niche.
William Wrigley, Jr. found his fortune after not one but two pivots. His first idea was to sell soap. He would give buyers a free can of baking powder with each bar of soap. But when he noticed that people were buying the soap to get the baking powder, he started selling baking powder instead., He threw in some free gum with every baking powder purchase and then eventually shifted again to turn his business into a gum company. This is where he excelled.
Your company may suffer a gap in cash flow while you are trying to tweak your business model. If that happens, you can find temporary financial relief through emergency small business loans.
Don’t Stop Marketing
You might be tempted to cut your marketing budget to save cash. This is a mistake. When you turn your back on advertising, you’re pretty much giving up on your business. You’re saying that you can’t afford to bring in new clients, which spells disaster for the future of your company. Even if you don’t have the budget for marketing, there are many ways you can advertise to save small businesses.
- Participate in forums, trade fairs, and networking events
- Create a Google My Business account
- Target influencers
- Ask for referrals
- Collaborate with other businesses
- Build a free email list and send out newsletters
- Try cold calling
- Write publications
- Use social media to your advantage
Fight for Your Company
In business, there’s no such thing as friendly competition. Take whatever piece of the market you can, and don’t leave anything behind.
Be sure to gauge your employees’ responses to these efforts. They will undoubtedly know something is up, and workplace anxiety might reach unprecedented levels if they think the business is going under. Your office could become a very stressful place to work. Do your best to keep the troops calm yet focused.
Take a Step Back
Did you create your company? Such an arrangement can cause tunnel vision. You might focus too much on what you do best and not enough on business in general.
There are plenty of entrepreneurs out there who enjoy success by chasing one thing they’re good at. But that kind of success can only last for so long before you must adopt other business principles. If you can’t handle these on your own, you might need to get help from someone who can.
Look at Your Financial Statements
Ask your accountant to gather the following documents:
- Credit card information
- Lines of credit transaction
- Checking account
- Income statement
- Cash flow statement
- Tax statement
- Payroll statement
- Liabilities
You need to review every one of these documents, looking for any possible waste. This process should help you become more familiar with your income, expenses, profitability level, and liabilities.
Waste is everywhere. Fortune 500 companies throw away fortunes on bad decisions. But they stay at Fortune 500 companies by fixing their mistakes by getting rid of unnecessary expenses as quickly as possible. Here are some ideas on how you can cut costs for your company:
- Put all the automated payments you make onto a spreadsheet and decide if they are still necessary
- Negotiate your lease with your property management company
- Switch credit card processing services
- Knock a zero off the end of your paycheck and invest it back into the company
- Reduce business travel
- Scale back the hours your employees work
Start with surface-level expense cutting. Then, go deep and cut through the fat and hit the bone. Think about what you absolutely need to run your business, even if this means having uncomfortable conversations and laying somebody off.
Send Invoices to Your Debtors
Small business financing isn’t the only way to fund your business. If you have clients that owe you money, they should be who you call first during a bind.
Some of your clients won’t pay you unless you push them. Send official invoices to everyone who owes you money. Include a personalized letter and follow up with a phone call. Be polite if you want them to remain your clients, but don’t be afraid to get serious. If they don’t pay you, then you shouldn’t want them as clients anyway.
Do a SWOT Analysis
A SWOT analysis is a strategic planning technique that helps people and organizations identify their:
- Strengths
- Weaknesses
- Opportunities
- Threats
The SWOT analysis helps you analyze and identify why your business is failing, such as not knowing your buyer persona, wrong timing or lack of funding. If you need quick cash to fix your business consider getting a merchant cash advance.
Focus on One Thing at a Time
Many CEOs have big ideas for their businesses. You want to launch a campaign and set up your sales funnel, website, social media channels, etc., focus on one thing at a time. But most importantly, focus on the most important thing, which is what will bring in revenue. Simply put, don’t overcomplicate things.
Focus on Your Clients
Go after your customers that spend the most often. All products and services have key buyers, and the concept is called The Dream 100 Strategy. There are usually 100 people that will buy your product or service way more often than anyone else. Keep these customers happy, and when times get rough, they will be the ones that will stick around. Have a list of your top 100 customers and go after them. Schedule phone calls to ask:
- How can you better serve their needs?
- How satisfied are they with your product or service?
- Why they chose you over the competition?
This will help you have better insight into your business.
Make Sure that One Customer is Not Worth More Than 20% of Your Business
If one customer is worth more than 20% of your current revenue, chances are if they decide to go somewhere else, you are going to be left with a different point from where you were in the beginning.
Learn from Your Mistakes
The chances are that your business is failing because you still have more to learn. Learn from your mistakes, sit down, and reflect. Understand what caused you to get into this position and be open about the mistakes you have made. Then pick yourself back up and move on. Don’t be so hard on yourself because you did not do it on purpose.
Sell Your Business
If you are trying to prevent your business from failing, maybe it is time to start a new one. At least now you know what doesn’t work for you. Take all the knowledge you acquired while in business, implement it on your new one, and start fresh. There are times when it makes more sense to recoup what you can by selling your business. This will give you the means to try something new. Before selling your business, make sure to clear all outstanding debts. Show the buyer that your business used to be profitable before failing, and be honest.
Let It Go
Sometimes the dog doesn’t come back from the vet. Most successful business owners have failed in previous ventures. They understood when it was time to cut loose and start over with something else. Here are some telltale signs that it’s time to call it quits:
- You are using your personal money to keep the business afloat.
- You are considering a personal loan to fund a gap in cash flow. If the debt belongs to your business, it will be relatively easy to start over and try something new. However, when the debt becomes yours, then you stand to lose a lot more if the company eventually goes under.
- Busy season isn’t busy. It’s a mistake to fund a gap in cash flow if that gap extends into what’s supposed to be your busy season.
Failing businesses sometimes only need a course correction. When you “right the ship,” you take a vessel that’s tipping and correct it. As the captain of your company, it’s your job to fix what’s wrong. We hope that you’re able to return to port with your ship intact, better prepared to chart your next adventure.
