How to Save a Struggling and Failing Business
You’ve long had a can’t-miss business idea, and you’re absolutely convinced it’ll be a winner.
Trouble is, your can’t-miss is missing right now. Sales are stumbling and cash flow is locked in park. Your business concept, for all its intrinsic value, isn’t hitting its potential just yet. But you won’t allow yourself to give up on it. By no means, should you. Let me offer some help.
Awhile back I wrote an article on how to decide when to shut down a business. But here, the issue is somewhere in between flying success and handing the vultures the menu — what can you do to keep a struggling business alive for a time and, in the process, give a worthwhile idea a chance to mature?
It’s a fine line to walk. You’ve got to really believe in yourself and your business idea (and hope others do, too). If you do, here are some ideas that may keep your entrepreneurial noggin above the water line:
Don’t under-react
Perhaps surprisingly, snafu No. 1 for a small business struggling to survive is failing to do enough to keep things together. Naturally, there can be a tendency to overreact — canceling every scrap of advertising, for instance, or trimming your staff down to the fax machine and the cat. But don’t make the mistake of acting too slowly or opting for cosmetic changes that have little real effect. “There’s a propensity not to accept the reality of the situation,” says John Ausura, a recognized expert on turnarounds, and a principal at Crossroads, an international restructuring and turnaround consulting company. “If anything, some small-business owners are so attached to their employees, they tend to not lay off enough to keep the business going.”
Don’t build for the future
Another common error that trips up countless businesses is living for next year or the next decade — and spending accordingly. Granted, it’s essential to plan for growth. But don’t overextend your resources on costs that have little immediate benefit. For instance, if you’re paying unnecessary rent for offices that you don’t really need just yet, opt for a smaller space (and perhaps even a smaller housing bill) until your business generally warrants the additional room. “Most small businesses spend more than they have to because they pay for capacity before revenues match it,” Ausura says. “Try not to build too much for the future. In fact, it’s a good idea to run the home business as though you were impoverished.”
Monitor your efficiency
Growth is by no means the sole dynamic that every small business needs. How it’s achieved it is every bit as important. Check the efficiency of what you do to make sure you’re not inadvertently burning cash — don’t let a salesperson rack up two weeks of expenses on the road every month when half of those sales calls could be handled by phone. Conversely, are you not doing any marketing? That could be just as much a problem (see this article). “It’s critical to put in performance measurements so that you get a sense of how efficient you are and what you need to change,” Ausura says. “You’ve got to focus not just on growth, but efficient growth.”
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Companies which really take off fast — those that go from a pittance to prosperity in a few months’ time — are few and far between. Keep your goals on a more realistic footing. For one thing, you’ll reach them faster than you would more aggressive objectives. Moreover, as you hit your targets, you can get a sense of the business picking up momentum — a much needed tonic. “Every business owner wants success, but don’t set your goals beyond what you’re reasonably capable of,” Ausura says.
Stay flexible
A business that’s searching for its footing can only take a headfirst dive into quicksand if it isn’t prepared to make adjustments along the way. Remember: If everything was working according to plan, you wouldn’t be struggling in the first place. Monitor your products and services carefully — if something isn’t panning out, don’t be gun-shy about retooling to find something that performs better.
Be straight with your employees about the situation
Protective and patriarchal (or matriarchal) as many business owners are, they’re reticent about sharing a business’ difficulties with their employees. That may be as inadvertently soft-headed as it is soft hearted. First, what’s going on isn’t exactly top secret — employees are bound to know that the business is stumbling, no matter if you tell them or not. On a darker note, telling your people that you’re struggling may soften the shock later on if, by chance, you’ve got to pass out some pink slips. But, by the same token, frame your communications with an invitation for ideas and suggestions of ways to turn things around. Someone may have a nugget in mind that, over time, makes all the difference. “Don’t kid yourself — your employees know what’s going on,” Ausura says. “And soliciting ideas from them can prove to be a real morale builder.”
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