How to Save a Struggling Business?
Acting quickly at the first sign of financial distress is essential when attempting to turn around your struggling business.
The earlier you act, the more options are available to you, whether the business is already insolvent or on the brink of a cash flow crisis.
No company director ever wants to find themselves in a position where their business is failing, but the important thing is to keep calm if you have arrived there, know your options, and take advice.
What are the Signs of a Struggling Business?
If you’re concerned that your business may be struggling, there are a few key signs to look out for:
- Cash flow problems. This is one of the most common signs of a struggling business. If you’re having trouble paying your bills, it’s a sign that your business isn’t generating enough revenue to cover its expenses.
- Declining sales. If your sales are going down, it’s a sign that there’s something wrong with your business model or that you’re facing increased competition.
- High employee turnover. If your employees are leaving at a high rate, it’s a sign that there’s a problem with your company culture or that you’re not paying your employees competitively.
- Customer complaints. If you’re getting a lot of customer complaints, it’s a sign that your products or services are not meeting the needs of your customers.
- Negative feedback from investors. If your investors are losing confidence in your business, it’s a sign that you need to make some changes.
If you’re seeing any of these signs, it’s important to take action quickly. The sooner you address the problems, the better your chances of turning your business around.
What to do if your Business is Struggling?
1. If your Business is Struggling, Take a Wider View
For a small business owner heavily involved in the everyday running of a business, it can be difficult to view the company as a whole and assess exactly where things are going wrong.
By taking a step back from day-to-day activities, it is easier to see where the real issues lie and think about the positive changes you can make to resolve them.
If you’re reading this, you are clearly strategising for the future of your company. Part of that process could involve bringing in an outside expert to offer another perspective.
Putting your head in the sand and hoping things get better is a tactic that many directors of liquidated companies regret once its too late. So the first point is to gain perspective, accept your situation, then take decisive action.
2. What Changes can you Make to Your Failing Company Right now?
It’s all well and good to make changes to improve the business for the better in the future, but when you’re facing a cashflow crisis, you need to take steps that have immediate results.
Thankfully, there are short-term cash flow solutions available to almost all small and medium-sized businesses, such as invoice financing, merchant cash advances and alternative overdrafts, which could provide you with a route out of a sticky financial situation.
Whether or not you choose alternative finance, improving the cash-flow cycle is a primary goal for any struggling business. The minute your liabilities are greater than your assets, you have reached what is called ‘balance sheet insolvency.’ Of course, finance is an immediate way to boost cash flow.
3. Are all your Business Assets Essential?
Some businesses get into trouble by investing too much capital in non-essential assets, such as buying stock they do not need or spending more than is necessary on equipment and machinery. Selling excess stock, even at less than cost price, could free up the finance you need to rebalance your cash flow and move the business in the right direction.
Selling or refinancing assets might seem like a drastic step, but at this stage, the reality is that without such positive action, your assets could well be liquidated anyway as part of a formal insolvency procedure.
At least taking this step yourself allows you to receive the maximum value for your assets and potentially save your business.
4. Are Your Employees and Supplier Relationships Essential?
For most business owners, selling non-essential assets is a darn sight easier than ending working relationships with suppliers and employees, but in some cases, this might be the only option you have. Some small and medium-sized businesses are guilty of expanding too quickly and taking on new members of staff before there is enough work to warrant a full-time role.
When you’re really struggling, ending relationships with suppliers and employees that aren’t absolutely essential to the performance of your company is something you should seriously consider.
The longer you wait, the worse the situation can become, so acting quickly can help to nip the situation in the bud before more jobs are at risk.
5. Streamline the Business
A common fault of company directors’ is their failure to identify where the real strengths of the business lie. The temptation to diversify and take on more activities is strong, but this increases the costs of the business and often detracts from its core operation.
In times of trouble, it is essential the directors revert to their core operations to give the business the very best chance of success.
What are the Top Reasons Businesses Fail?
There are many reasons why businesses fail, but some of the most common include:
- Lack of planning. A well-thought-out business plan is essential for any business, but it is especially important for new businesses. A business plan should include your business goals, strategies, and financial projections.
- Poor management. Ineffective management can lead to a number of problems, such as poor decision-making, mismanagement of resources, and low employee morale.
- Insufficient funding. Businesses need enough money to cover their startup costs and operating expenses until they become profitable.
- Failure to adapt to market changes. The business landscape is constantly changing, and businesses that are unable to adapt to these changes are more likely to fail.
- Competition. Competition is a fact of life in business, and businesses that are unable to compete effectively are more likely to fail.
- Economic downturn. A recession or other economic downturn can make it difficult for businesses to survive.
- Product liability. If a business’s product causes harm to a customer, the business may be sued for product liability.
- Regulatory changes. Changes in laws and regulations can impact businesses in a variety of ways, and some businesses may not be able to adapt to these changes.
- Natural disasters. Natural disasters such as hurricanes, floods, and wildfires can damage or destroy businesses.
10 things you should do to save a Struggling business
Here are 10 things you can do to save a struggling business:
- Assess the situation. The first step is to identify the root causes of your business’s problems. This may require a SWOT analysis, which will help you to identify your strengths, weaknesses, opportunities, and threats.
- Develop a plan. Once you have identified the problems, you need to develop a plan to address them. This plan should be specific, measurable, achievable, relevant, and time-bound.
- Reduce costs. One of the best ways to improve your cash flow is to reduce costs. This may involve cutting back on unnecessary expenses, negotiating with suppliers, or finding cheaper alternatives.
- Increase sales. Another way to improve your cash flow is to increase sales. This may involve developing new products or services, expanding into new markets, or improving your marketing and sales efforts.
- Improve customer service. Providing excellent customer service is essential for any business, but it is especially important for struggling businesses. Make sure you are meeting the needs of your customers and that you are going above and beyond to make them happy.
- Get help from others. If you are struggling to save your business on your own, there are many people who can help you. You can talk to a business mentor, coach, or consultant, or you can join a business support group.
- Don’t be afraid to pivot. If your current business model is not working, don’t be afraid to pivot and try something new. This may involve changing your target market, offering new products or services, or expanding into new markets.
- Be patient. It takes time to turn a struggling business around. Don’t expect to see results overnight. Just keep working at it and don’t give up.
Learning from your business failure
The experience of business failure, while disheartening, can also serve as a profound learning opportunity. It provides the chance to scrutinise your errors and develop a more resilient approach for future endeavours.
Firstly, it’s crucial to acknowledge your emotional response. Emotions like sadness and disappointment are inevitable outcomes of a failed business venture. However, the key is not to become mired in them. Take the necessary time to experience and process these emotions; then turn your attention toward future prospects.
Secondly, undertake a candid self-assessment to identify the underlying causes that led to the business failure. Did your business model lack viability? Were there financial missteps, or did customer acquisition prove more challenging than anticipated? The aim here is to achieve a clear understanding, free from self-deception, of what precipitated the failure.
Armed with this understanding, your next step is to extract lessons from your missteps. Establish actionable changes for your next business venture. Contemplate what could be done differently to preclude the recurrence of the same issues. In essence, your failure can serve as a roadmap for navigating future initiatives more effectively.
Lastly, perseverance is crucial. The annals of entrepreneurial success are filled with individuals who encountered failure but leveraged it as a catalyst for future achievements. The knowledge acquired through failure can be instrumental in shaping a more informed and resilient approach.