No one starts a business intending to fail at it. You started your business because you didn’t want to have a job, or you wanted to make more money. So it must be agonizing when your business is failing. You’re wondering, where did you go wrong? What can you do to save it?
I’ll answer your question with one piece of advice: There is no straight path to success.
It took Thomas Edison 1000 attempts to invent a lightbulb before he succeeded, yet he doesn’t see it as 1000 failures, just 1000 steps to his achievement.
I failed at 13 business ventures before I became a self-made millionaire.
Statistics say that 30% of new businesses fail within the first two years, 50% within the first five, and nearly 70% fail in their first decade. Can you guess what people cited as the number one reason why businesses fail?
Top reasons are cash flow problems (82%) and insufficient need for their product or service (42%), followed by lack of cash, dysfunctional or unmotivated team, or stronger competition. It’s easy to blame money for the failure of a business – you can’t run a business without money. But insufficient cash flow could be a sign that something else is wrong.
So what do you do when you’re in that situation, knowing you have only a couple months left to turn your business around? And is it possible to save it?
Twice in my business career, I’ve been near bankruptcy twice. There was also a time when I was leading a company to turn it around. Other comebacks from the past two decades – Apple, Marvel, General Motors and Starbucks – managed to save themselves from extinction, proving that turnarounds happen. So how can you save your business?
Today I’m going to give you three powerful ideas for what you need to focus on to save your business.
1. Focus On Cutting Expenses
Cutting expenses is not the same as being cheap. So I wouldn’t recommend lowering your employee salaries or make cheaper quality products.
If your business is failing, you need to squeeze out every dime of profit that you can. You’ll need cash. A business only goes out of business if it runs out of cash.
Automaker General Motors filed for bankruptcy and laid off tens of thousands of workers in the late 2000s. It survived near disaster when it got a federal government bailout plan, and trimmed and killed off its struggling car brand divisions like Saturn and Pontiac.
The amazing turnaround saved 1.2 million jobs. Similarly, Delta Air Lines filed for bankruptcy, then renegotiated union contracts and increased its fleet with used planes. They saved money, and got back into business. Now, you may not need to take such drastic measures but the concept is the same.
Look at every line of expense in your business ledger and see what you can cut out. Office parties at the local restaurant for example. See if there is anything you can sell to put cash in the bank, such as unused office furniture that secondhand stores will buy. Decide what you need to keep, such as money for payroll and overhead.
Here are some other ways you can cut expenses:
- Evaluate your contracts. In a soft market, you might be able to negotiate lowering your rent.
- Reevaluate employee responsibilities. Are they effectively doing their jobs? Encourage time management and freelance where that is effective.
- Leverage social media advertising by engaging fans organically instead of with paid advertising.
- Review your insurance coverage instead of letting it automatically renew.
Cutting expenses, especially those recurring expenses or monthly charges, is your first step to saving your failing business. If you have expenses that don’t bring you more money, cut them. Then, take a closer look at your sales record.
2. Focus On Producing Sales For Your Business
No business succeeds or fails overnight. If it is failing, it’s because you’re failing as a leader or CEO.
Where are you focusing your time? Inventing the product instead of working on what you can sell? Perfecting your service? Doing a lot of unnecessary things instead of getting to the core of the problem?
In the 1990s, toymaker Lego lost money when it faced competition from video games and other challenges. The company restructured its supply chain, made changes to its sourcing, manufacturing and distribution, and even got its largest Lego Group customers to participate in product development. By 2013, Lego was the world’s most profitable toymaker.
So focus on getting to the core of the problem and then on generating revenue and producing sales. No company ever goes out of business because of too much revenue.
Maybe you’re more of a people person so you focus on managing people instead of selling. In your company, you need to be the number one sales advocate. In my company, no one can sell better than me.
For Apple, no one can sell Apple products better than Steve Jobs. Whether he’s doing a sales presentation or announcement, even marketing, he’s closing deals. You need to figure out what drives the sales.
How is money being made in your business? You need to know the process in and out.
You constantly need to be thinking about how you can sell more. Maybe you need to go back to your old customers. Can you sell your existing customers more things? Do you have a product line? Where can you get new customers without doubling your marketing ad spend? Do an analysis and then make a plan.
3. Focus On Learning
If you’re in this situation, it just means that you don’t have enough knowledge. The books you don’t read don’t help you.
Just look at some highly successful role models. Self-made millionaires Mark Cuban and Dan Gilbert read between one and three hours daily. Billionaire investor David Rubenstein reads six books a week. They don’t read because they are rich. Rather, spending time on your own education makes you rich.
Now besides reading, how much time are you investing on learning? Are you taking courses? Going to workshops? More information and more knowledge means more choices. More solutions to solve the problem that’s in front of you that you don’t know how to solve.
When you have more knowledge, you’ll have not just one, but maybe five or ten ways to solve the problem. You might even be able to solve it faster. You can solve it with fewer resources and with ease.
Invest in a business mentor, someone who has been in a similar situation and can give you solid advice. Study what other successful entrepreneurs are doing. Be aware of best practices.
As the CEO of your company, you have to be honest with yourself. When cutting expenses, decide if something is or isn’t producing any revenue. Ask yourself if you dislike sales. Decide if you think of yourself as being in the business of marketing and selling your products and services. You must be very good at selling.
Know your own strengths and weaknesses and know the strengths and weaknesses of your competitors. Once you’ve assessed your situation and come up with a strategic plan, you can beat your competitors. You can outearn them.
But first, focus on these three steps to turn your business around.
How much time do you spend on learning about your business? Comment below.