In this article you will learn how to save a failing small business step by step from a temporary short term "crises", and help you regain your profitability and confidence. You will also learn a proven step-by-step process that can save almost any business in any economy. Plus you will learn how to select the best strategies for your business specific position, and how to implement them successfully without jeopardizing your business future.
6 Ways To Save & Turnaround a Failing Business
Saving and turning around a business is all about speed, numbers, and implementation. It's never easy to go through the process where your business has gone bad. Believe me, it doesn't take much to be in this position, and when it happens the last thing we want to do is talk about it. It takes guts to ask for help.
Here are the simple practical and proven 6 ways to save and turnaround a failing business.
1. Basic Requirements For Saving A Failing Business
A Viable Business – You need a business that has the potential for future existence, growth, development, and expansion.
Adequate Financing – It’s critical that you can survive in the short-term, while you fix your business.
Time – Any business on the recovery path needs time. Success doesn’t happen overnight, but you have to make the right decisions now, time is very important. The longer you take, the more difficult it becomes to save the business.
Motivation – This is a big one. You must be motivated to do whatever it takes. In many cases, the owner has lost interest, desire and drive due to the long period of financial pressure. Make sure you still have the motivation for it. If not, try to sell the business and assets.
Different Actions - Recognize that getting different results requires a different course of action. If you simply keep doing the same things, you’ll get the same results.
Commitment – Commit to your new way of operating. It’s easy to make plans to change but it’s another thing to actually carry out those plans. Success is a result of action based on planning. It’s quite obvious that things need to change, but the questions is, do you ‘have to’ change?
Team Support – Support from all key team members is necessary. Create a shared commitment to action between employees and owner/partners. When a business is in crisis mode the owner and staff needs to be in harmony and in step with the needs of the business. Everybody should help play his/her part in saving the business, but this won’t help if owner doesn’t lead by example.
Focus on Profits and Cash flow – Not Revenue – ‘If only someone had told me this before! ‘Millions of others, including me, have followed the wrong advice from so-called experts, and it has cost us dearly. I have lost a few of the 40 companies that I have owned due to this old traditional formula. I had to learn the hard way.
Determine Outcome and Goals – This is the hardest part and that’s to make the decision to become responsible for your own future. As long as you know where you’re going, it’s easy to get there. Set some goals for your business to have clarity where you’re going and why are you doing what you’re doing.
2. Logical Steps To Save a Failing Business
You need to follow a simple bullet-proof step by step method that will fix and turnaround you're failing small business and keep it fixed. Here is a series of logical steps that will guide you to a decision or course of action. These steps are to help you survive the temporary ‘business crises’, save your businesses from the edge of failure and regain your profitability. The process actually works for small business and is not based on some abstract theory or turnaround methods used by big companies. It does not require a lot of money and takes a little time and some know-how and a lot of action.
For full details on each of the following steps you can read the article - 10 Proven Business Turnaround Strategy Steps
Step 1 – Become a better business owner
Step 2 – Know your Numbers. Analyze your business
Step 3 – Stabilizing the business finance
Step 4 – Improve Cash Generation
Step 5 – Improve Cash Controls
Step 6 – Reduce Cost
Step 7 – Improve Profit Margins
Step 8 - Improve Service Delivery
3. The Secret To a Successful Turnaround
Turning your business around is all about "Numbers". As you can see from the examples below it is simple to make a huge impact on your profit and growth, but you need to keep score. You need to know your numbers in your business. If you don’t know your numbers you don't know your business and you will not know what to fix and if it is working.
"What you don't measure you can't manage".
The smallest wins in results will motivate you into more action. It will create belief and hope to continue.
In the examples below I use my simple business tool that allows you to visualize your business as a system, broken down into simple and practical but very important key success drivers. Turning your business into a visual one that will bring focus, clarity and understanding of the actions and results necessary for success. This tool is Absolutely Free for you to use.(See images below)
The tool lets you experiment with your current reality – without jeopardizing your business. By playing around with your numbers in the tool you will gain instant feedback on your planned actions, and find your best ideal business scenario. Try it, you will not regret it
These are the basic numbers that you have to evaluate, track, manage and consistently improve in your business:
There are only 4 factors affecting the profitability and growth of any business, including yours. You don’t have to make big improvements in each of these 4 areas to see massive results. (See images below) These drivers are:
- Your total sales every month.
- Your variable costs you have in producing the products and services you sell. These are variable costs because they vary as sales increase or decrease.
- The markup % or the price you charge.
- Your fixed costs, because they do not change.
Then there are 4 factors affecting the cash flow of any business, These drivers are:
- Current Cash, Bank Account balance.
- Average Receivables and Receivable Collection Days.
- Average Payables and Payables Payment Days.
- Average Inventory.
Then there are 4 factors affecting the sales of any business, These drivers are:
- Total leads or potential customers you meet every month.
- How many of these leads you convert into customers.
- How frequency customers buy from you every month.
- The average amount of money a customer spend every time they buy from you.
4. To Save Your Business You Must Keep A "Scoreboard"
Allow me to demonstrate how small changes can make a huge difference in your business - if you have a “scoreboard”
But without a scoreboard, your numbers will not have any meaning. You need to see the progress in real time. There is big power in small wins. Your best results will come when you know the “score”.
Let's take this business for example below that is doing 85 600p/m in Sales. The Variable Cost or COGS for these sales were 67 700p/m with a Markup % of 22.8% on products. The monthly Fixed Cost for running the business was 14 800p/m, making a Net Profit of
1 100p/m (1.3% of Total Sales)
Look what happens if we improve each of them with only 1 %... A massive 155% increase in profit.
Look what happens if we improve each of them with only 2 %... A massive 312% increase in profit.
5. Keep Focused On What's Important
Success is won or lost through execution. I've seen many business owners get past the immediate cash crisis and calm their creditors down, only to fail to execute their turnaround plans. They stop focusing on profit and cash flow, lose their discipline of daily measurement, and turn back to sales where the fun is.
The result is sliding back to negative cash flow, missed payments, the owner loses all credibility and there is no recovery. To avoid this, stick to your plan and keep a “scoreboard” You can’t play the game of business without keeping score, otherwise you’re not going to know if you are winning or losing the game.
6. Successfully Implement Your Strategies.
Know how to successfully implement your business strategies. But before you start making changes you need to evaluate your business current reality. This is a must for anyone in business. To examine your entire business from top to bottom, piece by piece. Once you figure out which parts are working, and which parts of your business aren't working, you can start fixing them or get rid of them entirely - so that they will stop wrecking your business and starts to perform amazingly. You need to look at the ‘whole picture’. By having a clear picture you will be ready to identify and eliminate obstacles that are holding you back and create a step-by-step plan of action to achieve all your goals.
For full details on each of the following steps you can read the article: How To Implement Your Business Strategies: Step by Step
Step 1 – Evaluate business current reality
Step 2 – Determine outcome and goals
Step 3 – Decide on preferred solutions and actions
Step 4 – Take action immediately
Step 5 – Monitor and evaluate results
Step 6 – Refine your strategy and re-measure.
Step 7 – Increase what's working, or discard what’s not
Step 8 - Rinse and repeat
Now it's your turn. Good luck.