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A Five Step Guide for a struggling business

By Elliot Harris

When you launch or enter into a business, you naturally want it to succeed. However, there are a multitude of obstacles and challenges you may need to overcome and, if you don’t, you may find your enterprise struggling.

A massive 60% of businesses fail within their first three years – so you are not alone if you are facing failure in yours. Equally, signs of trouble do not mean that your company is destined for defeat. It is possible to turn it around, but you need to take appropriate action first.

If you are concerned about the state of your enterprise, it is crucial to remain calm, to take stock of what the issues are precisely and put an effective strategy in place to weather the storm.

We have created this step-by-step guide to support you through your worries and identify the action you should take now to increase your chances of survival.

  1. Determine how bad the situation is
  2. Identify the problem
  3. Find an appropriate financial solution
  4. Create a turnaround plan
  5. Get advice

DETERMINE HOW BAD THE SITUATION IS

If you are seeing the signs that your business is struggling, you must make yourself wise to the extent of the problem. It may be tempting to bury your head in the sand and wait for everything to blow over, but things can quickly snowball if you do not take preventative measures.

As soon as concerns are raised, dig deep to find out how bad the situation is. This means scouring through your company current accounts and account history, speaking with staff members and stakeholders, reviewing customer feedback and analysing data around output, sales, revenue and so on. By doing this, you should be able to identify concerning patterns, find out exactly who is being affected and how and determine the financial impact your company is facing. You may also be able to predict how the situation may worsen if unaddressed.

Once you have determined the severity of the situation, you will be able to comprehend whether it is salvageable and how much support you may need to save your business. This is key to deciding the next steps you take, so it is essential to get a thorough understanding of the impact on your enterprise.

IDENTIFY THE PROBLEM

If you are struggling, the key to solving it is finding the root of the problem.

In some scenarios, the cause may be apparent straight away. If it isn’t, you will need to do some digging across your operations to find out what the issue is.

The first step when searching for the cause is to check your company bank accounts and financial records to determine when it started. Signals could include falling sales and revenue, increased costs, late and missed payments or reduced cashflow. If you see a pattern of this, try to find where it first appears in your statements. This will help to identify when the issue initially started and lead you towards the problem.

It’s also important to review your accounts in context. For example, if you see a period of falling sales, did this happen the year before? Is there an external factor that might be driving those sales (such as UK lockdown or national economic uncertainty)? Considering these factors may additionally help you to identify the issue and seek appropriate support.

Next, communicate with the different business areas to determine any changes that may have occurred in each department. This could include changes to productivity, leadership, staff and so on, which may have had a knock-on effect on your business. By speaking to employees, you may also get useful insight that will further help to identify the problem. For example, your sales team can share any pushback or struggles they have been facing, which could indicate a product underperforming or being overshadowed by a competitor. Your customer services team may share feedback they are receiving from customers – including any negatives that they are seeing. By utilising this insight, it could paint a clearer picture of exactly what has gone wrong.

It may also be worth carrying out competitor benchmarking. By doing so, you will be able to determine whether your industry as a whole is facing strife – which could indicate a change in customer behaviour or needs – or if it is just you. You can also identify any new competitors who could be impacting your market share or changes your existing competitors have made which have placed them ahead. Checking out the competition may even help you identify potential recovery routes that similar businesses have taken.

Finally, you may wish to talk to your customers to find out their views – particularly if you are witnessing falling sales. This could be done via exit calls to customers who are cancelling services with you, monitoring social media and reviews sites, or even holding focus groups with a set of customers to open discussion.

FIND AN APPROPRIATE FINANCIAL SOLUTION

Once you know the issue your business is facing, you will be able to find a way to fix it. Whatever your strategy is, the chances are you will need financial support to allow your enterprise to survive while recovery is undergoing. This is particularly apt if you have witnessed falling revenue as a result of the issue.

If you are facing a downturn, you may struggle to find an avenue that will accept you. Fortunately, there are many routes that will provide funding to ailing companies – but it is essential to find one that suits your needs.

When you are experiencing cash flow issues, as a result of decreased revenue, there are several cashflow management funding methods which could help you to add working capital into your operations.  These tend to be short-term fixes that can be used on your existing business, such as trade financeinvoice factoringstock finance and leaseback of equipment. These will re-introduce capital into your enterprise which you can use to get processes moving smoothly, access supplies and generally assist your company during the rough patch.

If you need more substantial funding, it is worth looking at more conventional loans or even equity investment. While many commercial lenders are unlikely to offer you money when your company is experiencing hardship, there are alternative solutions.

One of these is peer-to-peer lending (also known as P2P), which sees groups of investors pool their money to lend to a company. If you are able to convince these investors of your turnaround strategy and the success it will bring, they may be willing to lend to your business even if you are struggling. However, they will expect a reasonable rate of return so you must be confident in the survival of your enterprise.

An alternative is crowdfunding, which sees businesses pitch to investors to invest in their business in exchange for equity. Struggling companies have been successful through crowdfunding in the past. Not all companies will be suitable for crowdfunding, however – those that typically are will have created a compelling pitch for the investment they seek. The choice of which crowdfunding platform will come down to the nature of your business and who it will appeal to most.

Finally, there is turnaround finance. Turnaround finance is aimed at those companies who have experienced hardship but are capable of recovery with the right support and investment. If your business has suffered substantial losses but fundamentally is a sound business, then this could be the most appropriate solution. As it is aimed at struggling companies, you are more likely to be accepted if you have the turnaround plan in place and get the funding you need to overhaul the enterprise.

CREATE A TURNAROUND PLAN

Once you have determined the problem, your focus needs to be fixing it. A turnaround plan will document amendments you are making to your business and how these will address the issues you are facing.

In your turnaround plan, you should list any changes that are being made (such as new processes), how they will be made and the expected impact. Other elements to include are who is responsible for the changes, any logistical requirements needed to make them a reality and any key dates, such as when changes will go live.

It is also important to include financial information about your turnaround, including how you will fund any work being done and when you expect to be able to reverse the effects of falling profits and revenues.

Make sure the plan is shared with stakeholders and clearly communicated to your staff. This will ensure buy-in from your entire team, so everyone is on the same page and working together to ensure the success of your company.

You should also monitor your business in line with the turnaround plan over time. This will enable you to see if the strategy is effective and bringing the desired results. If not, it may be worth revisiting the plan to see what isn’t working. This will also allow you to know if you are reversing the decline your business was previously experiencing or if it is getting worse – indicating further action needs to be taken urgently.

GET ADVICE

A struggling business is a challenge, and many entrepreneurs will find themselves at a loss about what to do next. In most cases, it is wise to make the most of impartial advice which can cast an honest view of your company and its chances of survival.

At FSBA, we have a team of advisors with expertise working with different business types and sizes. As part of this, we have worked with many companies undergoing unique struggles, to provide guidance that will help them to overcome their barriers.

We can work with you to determine the problem you are facing, shape plans and put you in touch with relevant contacts, including lenders of turnaround finance. As a result, you access the support you need for your company and assistance in carving out your road to recovery.

Get in touch today to find out more by telephoning us on 0333 444 8522 or use the contact link below and one of our experts will be in touch as soon as possible.

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