Businesses will undergo many challenges in their lifespans, stemming from external circumstances or internal issues. Regardless of the problems you face, you hope to come out the other side.
However, there are times when it’s not as easy to overcome obstacles as you might think. Problems linger and lead to declining performance. Common symptoms include falling sales and revenue, stagnating profits or inability to manage costs.
When you get to this point, it’s hard not to worry about failure. However, survival is possible if you re-examine your business and make changes that allow for success.
We have listed our top tips for turning around a failing business.
- Identify the problem
The first step to a turnaround is understanding what has gone wrong. While the numbers may tell you that things are failing, you need to clarify the reasons why.
There are countless reasons a business could fail, including changing customer demand, rising prices, a weak value proposition, a decline in quality or financial mismanagement.
Understanding the cause is crucial to a successful solution, especially as you progress – so spend time analysing the data until you gain the insight you need.
- Write a business plan
A good business plan is essential to success. It dictates your value proposition and how you will operate in a way that makes financial and logistical sense and generates demand from customers.
If you are at risk of failure, there may have been flaws in your original plan, or the circumstances have changed too much for it to be viable. Part of your turnaround should include revisiting your business plan to optimise it for the current market.
Seek to write a strong plan that includes a valuable offering while outlining how you will overcome barriers and operate profitably. Working with an advisor can help to solidify this.
Once you have your revised strategy, you should focus on adapting the business to align.
- Motivate your workforce
It takes more than one person to get a business back on track. While you need effective leadership to chart the course, you also need your staff to be on board and make the appropriate changes.
Low staff morale or failure to retain skills often leads to poor service and quality that could cause you to lose customers, so aim to stamp this out.
Once you have understood the turnaround strategy for your business and the solutions required to fix the problems, be sure to communicate them to your employees. Make clear their role in the process. Staff training may also be integral to empowering them to evolve and meet your company’s changing needs.
- Focus on the parts that work
When trying to redefine your business and get it into working order, it’s sensible to focus on the performing areas. Some functions will be more effective than others, which typically highlights where customer demand is.
If you are experiencing falling revenue, it’s crucial to remove the elements that aren’t profitable. This helps you to control costs and any associated losses.
You can then invest your time and energy into the functions that do work, maximising value in these areas and focusing on what makes you successful.
- Cut unnecessary costs
If your business has been struggling, revenue will be. This often leads to negative cash flow, which, if left unaddressed, leads to debt and disruption.
When planning a turnaround, you must get your finances into good shape to survive the interim period. Reducing costs is key to boosting cash flow and lessening the pressure.
Conduct a financial audit to determine which costs you can eliminate, including those related to poor-performing areas. Depending on the scale of the issue, you may choose to scale down to only the most necessary expenditure.
By minimising your costs, you will help to keep your cash flow healthy while you make the necessary adjustments. It also helps you instil better cost management in the future to optimise profit.
In some cases, you need a brand refresh. This is particularly key if you have suffered negative feedback or reputational damage.
If you are looking for a fresh start for your company that puts any negative connotations into the past, consider a rebrand. This often involves giving your business a new name and look.
While some parts of the company will remain the same, it enables you to take on a new personality to mark the next chapter and avoid any bad associations that alienate customers.
- Monitor progress
Once you have made the necessary amendments to begin the turnaround process, you must track progress to understand if the changes are having the desired effect.
While you will need a degree of patience, as it will take time to see results, it’s still crucial to acknowledge the signs of whether your business is getting back on track or worsening. If you are at a point of failure already, not taking the right action promptly could see the situation worsen beyond your control so insight is crucial.
If you don’t see the expected impact, it might be a sign that you need to switch tact – or the problem could not be improved, and you need to look at your closure options instead.
While a struggling business will ring alarm bells for any owner, it doesn’t mean the end is nigh. There are many success stories of companies getting on the right footing after a setback. However, it is crucial to act and begin the turnaround process rather than bury your head in the sand.
The tips above should help you understand how to manage your business turnaround, find the cause and improve your chances of survival – enabling the legacy of your SME to continue.
It is important to work with a business advisor who will support you in identifying the necessary changes and carving out the path to long-term success, get in touch today and access one of our team of experts.