How to Save a Failing Business
It can be hard to find funding when your company is struggling to stay afloat, but these ideas may help you make it through rough waters. Let’s look at some bad habits shared by failing businesses and discuss smart ways to fix each issue.
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 you got there, though, can be a lot more difficult.
Why Do Small Businesses Fail?
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’s why:
- Can’t find money – Most businesses need cash from investors to get things going. If this money dries up early (e.g., the investors don’t like what they see and decide to jump ship), then the company most likely goes under.
- Underestimate costs – One of the biggest reasons why small businesses fail is because the company costs more to run than anyone thought it would.
- Suffer one big mistake – A bad marketing decision can doom a young company.
Many of the companies that end up being successful also suffer these same setbacks. Often, the difference is better management, faithful investors, and luck. 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
Avoiding mistakes is one thing, but pulling a company from the brink is another. 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. With every baking powder purchase, he threw in some free gum, 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.
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.
Cut Expenses
Waste is everywhere. Fortune 500 companies throw away fortunes on bad decisions. But they stay 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
Look for the fat. Trim it.
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 go 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.
Sell Your Business
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.
Don’t look at it as a failure. It’s your chance to begin again.
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. It’s our hope that you’re able to return to port with your ship intact, better prepared to chart your next adventure.
