What To Do When Your Business is Failing?
The statistics are readily available; more than 50% of small businesses don’t last beyond the five-year mark, and as many as 70% will no longer be in business after two years.
At the onset of a business life, you may belong to the optimistic half who adamantly thinks that their small startup would survive the rough times. Let us smash the ego for a moment and acknowledge that there are always odds of the business taking a turn in the wrong direction.
Eventually, some have to sell off, transfer ownership and execute painful restructuring of their business. Some others close down in entirety.
So, what do you do when your business seems to be failing?
What separates a real entrepreneur from a pretender who’s just playing the game is the way we react when your business starts to show signs of failure. Here are some things that you should consider when dark clouds begin to form over your business.
1. Don’t give up, yet
If you walk away at the first sign of a downturn, you’ll live with that failure without a hint of making a phoenix-rising comeback. Having access to tools that will patch the hole in the hull, but going down with the ship anyway, isn’t noble. It’s silly.
Never give up until it’s obvious that no action or choice is going to salvage your business. Step up and take ownership of the situation.
2. Figure out your time horizon
Once you recognize trouble you need to figure out how much time you have left. Know your books, review your expenses against your capital on hand, review incoming revenue and start planning. If you’ve got more than 6 months before you have to shut down then you have time to take action and try to turn things around.
3. Line up your staff
Few entrepreneurs like to lay people off; but if you can trim your employees down to a more manageable group of people that are significant assets, do so. Just don’t let the change in staffing harm your production, service or deliverables. If you don’t trim your staff strategically, you’re hemorrhaging money.
If instead you opt to cut pay or salary, expect a moral hit that could negatively affect staff performance. If you must cut pay, include yourself in that pay cut and make sure that your pay cut is larger (never smaller) than that of your staff.
Renegotiate. Not just with vendors; everyone. Renegotiate your rent, equipment lease terms, vendor contracts and anywhere else that could save you money while adding time to the lifespan of your business. Be open and honest about your position, because a lot of other people you do business with could be in a similar situation.
A vendor may extend some kind of credit or partial pay as opposed to losing your business entirely.
Your landlord is probably happy to adjust rent or provide you with a few months of free rent to help you along. OK, fine, some landlords are really mean, but renegotiations, how small there are, could possibly be fruitful and can lead to the recovery of your business.
If moving your business premise from the expensive central of KL to Klang seems a practical business decision, exercise this option. Or better, if your business can feasibly be run from a temporary home office in your small Taiping town, by all means do it.
5. Identify the source of the problem
If you don’t know what the issue is then you can’t address it. Did you just increase your prices with a negative result? Was it bad PR that turned off customers? Did you add services that spread you too thin and now customers are leaving? Or are family affairs getting in the way into the business?
If you can pinpoint the problem, even if it’s you and a decision (or multiple decisions) you made then it’s likely fixable. If the problem is with a particular service then you can look into restructuring the way that service is delivered. Is it the product? See how you can fix that product to correct the issue.
6. Talk about it
Be open with people about your current financial state. It might not lead to a sudden influx of funding, but talking with everyone including partners, vendors, friends and family can provide the support you need to weather the worst of the mental storm. Find friends who have been in this predicament before. Seek guidance and mentorship.
A failing business can take a serious emotional toll. The support of others could be just what you need to restore your drive and motivate yourself to success. Just don’t over pester your Facebook wall or Twitter updates with your incessant emotional outbursts.
7. Consider business acquisition by others
When all else fails, consider selling your company. You might not make a fortune—in fact you’re more likely to lose money—but at least you’ll have a graceful exit. You can also break up the business and sell it off in parts including the assets. A viable exit strategy is still an exit strategy. Selling off your business is a more graceful and honorable closure than smashing the plane into the runway—especially if there are employees riding it out with you.