Turning around a failing business is one of Startup Addict Musings more popular posts and a few folks commented it was a bit too qualitative for their needs. I decided to write a part II to the article and add more tangible solutions.
If your business is failing it’s most likely due to one of these reasons:
1. not being profitable
2. cashflow problems
3. poor management
Not being profitable is a direct result of not truly knowing your fixed costs, there may also be a paradigm shift within your industry that injures your sales. The other culprit for a failing business is cashflow problems usually stemming from a myriad of reasons:
1. Low profit margin or low revenue volume
2. Don’t understand your fixed & variable costs
3. Collecting money (accounts receivable) in a timely fashion
Poor business management is the last of the three most common reasons your business may be failing. If you happen to be the management then an outside consultant, mentor or business associate may be neccessary to enable you to see the forest from the trees. If you have hired management to run you company you should identify the problem or find managerial replacement.
Your failing business may be a result of a less common reason (like 50% of sales are from one client you lost) but don’t lose heart, identify the source of the problems and review the systems you have put in place for your company…try to adapt and overcome. You may need additional funding, give up an equity stake or get a line of credit or bridge loan. That step should only be taken when the source of the problem is identified. You may deem the business irreversible and ultimately have to bankrupt, liquidate or close, but at least you did the due diligence neccessary to make the right decision.
Remember if you do as you always did…you will get what you always got….so change
About Tod Whipple
Many business owners end up closing their doors because they are unaware of a number of strategies that have been proven to help a majority of businesses turn themselves around. One of those very effective strategies is reducing the company’s accounts payable. This helps improve cash flow, reduce debt and improve the company’s ratios so that it can successfully find a buyer, an investor or a lender.
I have written an e-book telling business owners exactly how to do this for themselves. It is free and available for download at http://www.reducemypayables.com. If you are struggling, you owe it to yourself, your employees, your customers and your vendors to make sure you have all the information and tools at your disposal to save your company.