Failure is the norm rather than the exception for businesses. The signs can be plain: the business isn’t expanding and you’re having trouble meeting financial obligations. Or the competition is getting intense in an oversaturated market. At this stage, acting quickly gives your business the best chance of recovering, avoiding mounting debt, and returning to profitability.
There are a number of strategies for turning around a failing business. From restructuring and turnaround advice to marketing and business plan, know the different options available to you.
1. Conduct an honest assessment of your business
Be willing to admit failure and see your business for what it is. Successful turnaround strategies are based on realistic assessments of failing businesses. An accurate perspective of your business is a solid foundation for taking the right action.
Assess what’s happening in your business in terms of being overleveraged, poor sales, low margins, and below average customer retention. Unpaid suppliers and outstanding receivables are also warning signs.
- Overleveraged– You have too much debt and you’re finding it hard to make payments.
- Cash flow– It’s a challenge to maintain enough cash flow to facilitate daily operations.
- Sales– Your sales teams consistently fail to meet quotas.
- Profitability and margins– Your business is finding it challenging to maintain profitability. Margins are low, whether due to intense competition or poor product positioning.
- Customer retention– You’re spending the same amount on attracting new customers but retention is declining.
- Outstanding receivables– Suppliers are refusing to work with you because of unpaid invoices.
Accurate financial reports are vital for a clear assessment of what’s happening in your business. Work with your accountant to ensure your records are up to date and accurate.
2. Rethink your strategy and business model
Do you know why your business exists and where it’s going? Ask what need you’re serving in the market and what problem you’re solving for consumers. Assess this in the market context.
Changing market demands are often behind business failure. Are you using an outdated business model no longer in line with changed market demand? Have you been losing market share consistently? Are you targeting an oversaturated niche with too much competition?
Businesses trying to do too much end up stretching themselves too thin. Are you trying to do too much and attempting to be all things to all people? Can you adapt your strategy and product line to focus on a more profitable gap?
Check your business plan and consider whether it’s still working for you. If your business is in trouble, your original strategy and plan likely needs updating. Research the market and rework your business goals to reflect what’s happening in the market.
3. Review your team
Employees and the management team could be the reason behind your business struggles. A complacent management, poorly trained staff, and a culture of antagonism instead of teamwork are red flags when it comes to business failure.
Sometimes the problem is poor motivation and incentives. Make sure your remuneration structure encourages employees to give their best. Look for ways to boost culture and collaboration.
4. Seek quick hit opportunities
Identify quick hit opportunities for boosting revenue. When your company is in trouble, it’s not always feasible to pivot to new product lines. Instead, look for quick hits to generate extra revenue quickly.
This approach could mean cutting out less profitable product lines and concentrating on getting more of your core product to market. Negotiate with suppliers for financing and credit if necessary. Be transparent and honest about your financial situation, and check they have the capacity you need to effect the expansion.
5. Change your marketing approach
Sometimes rebranding and changing your marketing approach can help your business get back on track. Spending money on rebranding your business might be the last thing you want to do during a business turnaround, but refreshing your marketing strategy could help you survive in a crowded marketplace.
Screen marketing services to get a competitive rate, or use an incremental marketing approach to keep costs under control. An incremental approach lets you test different channels and marketing messages in stages, so you can change and adapt immediately. Instead of committing to a single large spend, you can scale up in stages.
6. Redesign operations
If you have wastage in your backend, this could be the root of your business’s troubles. Ensure your backend operations are as efficient as possible. Poor inventory control, inconsistent quality, and excessive wastage affect profitability and customer retention.
Constant delays and poor coordination of resources (human and other inputs) are also signs of poorly managed operations. Work with line managers and staff to identify disruptions and wastage in processes. Eliminate these with operation redesign, staff training, and tools such as IT equipment software.
7. Seek turnaround advice
Turnaround advice from experts can include turnaround finance, restructuring, and external administration.
Turnaround finance is among the most drastic options for businesses in trouble, but finance could be highly effective for getting out of trouble. Turnaround finance gives your business the cash injection it needs to drive a turnaround strategy.
Keep in mind getting turnaround finance might not work if you don’t have a realistic strategy to bring your business back to profitability.
Restructuring experts assess your entire business and provide recommendations for rectifying issues affecting profitability. Usually the experts will come up with a new business plan. In more drastic cases, they might recommend external administration. Your business restructure could include a debt restructuring plan to pay your creditors while you turn around your business.
For businesses in trouble, the best option could be entering into voluntary administration while you work out whether to continue trading. This can give your business breathing room from creditor demands while you decide to wind down your business or explore another option such as restructuring.
If your business is in trouble, obtain expert advice quickly so you can make an informed decision about the next step to take. Insolvency experts can help you review your business strategy and operations. They can give you advice about turnaround finance, restructuring, and other more drastic options.