If your business is struggling, you may not know the best way to fix the problem without some help. We’ve put together 10 ways that you may be able to use to turn your struggling business around.
If you aren’t sure where to start, contact us and speak with the experts about what actions may be needed for your business to become profitable again.
1. Identify the problem
First things first, you need to be willing to admit there’s a financial problem in the business. Successful turnaround strategies can only be based on an honest and realistic assessment of the business. Often directors will turn a blind eye to the fact that their company is unable to pay its bills when they fall due and rely on the false hope that things will change.
Once you accept that there’s a problem, the next step is to find its cause. Is it poor sales, low margins, or low customer retention? Knowing exactly what’s going wrong in your business will help you determine the best course of action to turn it around. The main indications of financial hardship in a business include:
- Being over leveraged – having too much debt and not being able to make payments.
- Poor cash flow – it’s becoming difficult to maintain enough cash flow to facilitate daily operations.
- Low sales – the business’s sales team is consistently failing to meet quotas.
- Reduced profitability – the business isn’t maintaining its profitability.
- Lack of customer retention – money is being spent on attracting new customers, while retention is declining.
- Outstanding receivables – suppliers are choosing not to work with the business due to unpaid invoices.
In order to be able to properly assess these issues, it’s vital for the business to keep accurate financial reports. If you’re having trouble, work with an accountant to ensure your records are up to date.
2. Rethink your business strategy
Businesses can often fall into the trap of defining themselves by the products they sell, or the markets they operate within. This can result in the business losing sight of who they are and why they exist.
Hence, the next step in turning around the business is to ask why your business exists and where it’s going. Are you serving a particular customer need? Are you targeting an over saturated market?
If it becomes apparent that your strategy is no longer working for you business, then it’s time for an update. Start by researching the market and reworking your business goals in line with what’s happening in the market.
3. Review your team
Your employees could also be the ones failing your business. Complacent management, poorly trained staff and negative workplace culture could be behind your business’s falling sales and poor customer retention.
But before you start letting people go, have a conversation with staff to get to the bottom of the problem. Sometimes the lack of motivation and incentives can be driving a negative culture in your business. This can be overcome by introducing a remuneration structure that encourages staff to work hard. Motivated employees are the best innovators, which can be a great asset for turning around your business.
Unfortunately, laying off staff may be a reality for your business to get back on track. In order to survive, you’ll only want to keep the people who are making money for the business. However, ensure you are careful and sensitive throughout this process. Mass cuts can also negatively impact company culture by instilling a fear among remaining employees that their job could be next.
4. Seek quick hit opportunities
Boosting your revenue is an obvious one for getting your business back on track, but it’s not always feasible to pivot to new product lines. Instead, look out for quick hit ways to make some money.
One way to do this might be cutting out the least profitable product lines and focusing on getting more of your core products onto the market. You should also consider reducing unnecessary stock. Holding high levels of stock that aren’t needed will reduce your company’s working capital, so make sure you review your sales book and use it as a guide on what sort of stock you should be retaining and what isn’t moving.
Another way to make quick cash is invoice factoring. This involves selling your invoices to a funder, who will usually provide 75-85% of the invoice value immediately. This type of financing may be sufficient to keep the company going until the bigger problem is resolved.
5. Negotiate payment terms
When reviewing your financial situation you should be identifying your immediate payment obligations and the state of your debtors ledger. Look at who the most important creditors are (those who require payment first), then approach them about changing payment schedules. This may even be a negotiation to cease payments all together for a period of time.
Organising new payment terms with creditors will help your business to free up cash flow to meet other more urgent financial commitments and ultimately give you time to fix the business.
6. Look to suppliers for help
If you can’t raise additional finance, you should consider deferring payments to suppliers, or renegotiating supply agreements to include discounts. If you have a good relationship with your suppliers, or you’re an important customer to them, be upfront and honest with them about your financial position. Many suppliers would have experience with companies in similar situations and would be willing to help. In fact, most would prefer to retain a customer and keep them going forward, over having to write off the current debt.
7. Actively manage expenses
Now is the time to be objective about what your business is spending money on and cut down on unnecessary expenses. Business costs like travel, entertainment and accommodation can be cut back during times of financial hardship. When it comes to things like bonuses and fringe benefits such as business lunches and company cars, if they aren’t essential for running the business, or adding any value for customers, then it could be time to remove these perks. Of course, doing so has the potential to impact staff morale, so it’s important to be transparent with your employees and find other ways to motivate them during the turnaround period.
8. Shake up your marketing approach
Spending money on re-branding your business might be the last thing you want to do during 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.
9. Redesign operations with a business restructure
A successful business requires optimum efficiency in its back end operations. Poor inventory control, inconsistent quality, and excessive wastage all affect your business’s profitability and customer retention.
Constant delays and poor coordination of resources (human and other inputs) are also signs of poorly managed operations. An attitude of ‘that’s just the way things are done around here’ can be extremely damaging. Just because things have been done a certain way for many years, doesn’t mean it should continue to do so.
Work with line managers and staff to identify disruptions and wastage in operational processes. Eliminate these with operation redesign, staff training, and tools such as IT equipment software, for maximum operational efficiency.
10. Ask for turnaround advice
While there are many things you can do to help get your business out of financial trouble, often it may be beyond your expertise. 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 you out of trouble. Turnaround finance gives your business the cash injection it needs to drive a turnaround strategy.
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 whether to wind down your business or explore another option such as restructuring.
Getting back on track
It’s definitely possible to turn around a struggling business. If your business is in trouble, make sure you 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, providing you with essential advice about turnaround finance, restructuring, and other more drastic options.
More information? To find out more, give us a call on 1300 023 782 or email firstname.lastname@example.org.
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