So, Your Business is Failing.
What are the basic things to get under control to turn things around?
So, your business is failing. Headed for bankruptcy, and hurtling toward the cliff of disaster at an alarming rate. You’ve tried hiring the right people. You’ve tried “thinking outside the box”, rebranding, repositioning, relaunching, and any other combination of smart entrepreneur tricks you found on INC or LinkedIn. But nothing seems to be working. You’re losing cash and resources like it’s going out of style.
What are your options? What can you do to fix it? And where do you start?
Before we begin, let’s get a couple things out of the way first:
- Don’t blame employees. (They only follow their leaders)
- Don’t blame your product. (If someone can make millions by spraying perfume in a toilet bowl, your product can make money)
- You are the reason the business is failing.
If you can make it past those three bullet points, congratulations, you’re already far ahead of many other owners and managers who can’t (or won’t). The inability to step back and recognize the actual problems with the company leads to failed businesses.
So what are the main problems? What should you be looking for when you step back?
There are two.
The first is in regards to the financial elements of the business, and the second deals with the conceptual strategic vision of the business.
1) Financial
You have to do all that is possible to drive cash. Your actions and decisions must be made with a simple focus: (1) retain more of the cash you have coming in, and (2) minimize the cash going out.
A lot of what I do in setting up and managing a business is driven exclusively by cash. In fact, the cash flow document (a hybrid form of the usual account version) is the primary driver I use for all my businesses. Mostly because you can’t fudge cash, what’s in the bank is what’s in the bank.
If you get caught up in the “big ideas” without retaining a firm understanding of your business’s cash flow, then you are setting yourself up for failure.
Net income, EBITDA, or any other feel-good measures of success can be made to appear however you want them to. But at the end of the day, you don’t pay your employees, your vendors, or yourself with these measurement tools.
At the next bonus time, try handing out some EBITDA to your employees and see how thrilled they get. You’ll be met with blank stares and for good reason.
Cash, checks, or any negotiable instrument that represents cash, is the only way a business can thrive. It’s the only way to satisfy the angst of the creditor waiting to be paid or get anyone to do business with you. So tear away all of the measurements devices you use that don’t drive cash and refocus your efforts on any activities that do.
The best way to do that, is to focus on, and only work on, TWO things:
a) That which grows revenues in a measurable way.
Handing out branded pens does not grow your revenues in a measurable way. That is a waste of time, money, effort, and frankly only a distraction; not to mention very cliché.
Do things that you can unambiguously measure that grow revenues at a positive margin. Start doing some incremental analysis using your capacity to generate any degree of margin.
b) Cut out any degree of costs that is entirely unnecessary, or non-jugular.
It’s a fairly simple recipe, increase the top line, decrease the costs which then increases the bottom line.
Now, it’s more complicated in practice than I make it out to be, but all too often I find businesses overcomplicating the easy things because they focus on the wrong things.
As Stephen Covey would say, the main thing is to keep the main thing the main thing. In business, the main thing is cash.
2) Vision or Strategy
What is your vision? Do you even have one? Do you believe in it? Does it stir your soul? Is it clearly communicated to your employees? Do they believe in it?
These are the questions you need to be asking yourself. It’s imperative that you measure where you stand right now against your business’s vision from the start.
Be brutally honest with yourself. Analyze it from a customer, employee, or vendor’s perspective. Get the full 360-degree perspective on who you really are now. Are you meeting the expectations for which you originally set for this enterprise? My guess is if you’re struggling or failing, you’ve gotten off track somewhere.
After you complete this honest assessment. Then, very clearly, innumerate to yourself and then increase that circle of influence to others as to where it is you want to go. Adjust that vision, purpose, or mission so that it realigns with where you can get to and where it is you want to get to.
Once you have an agreed-upon starting point, and a firmly set ending point, working out how to get from A to B is really quite straightforward. I’ll leave you to determine how to develop the tactics and many strategies that will get you there because that is specific to each individual company.
But the mistake that most leaders make is having a curbed vision, mission or purpose, one they don’t hold strongly, and it never truly guides their actions.
Without a firm understanding of where they currently stand, many try to spring forth towards their vision off a base of tapioca pudding, it gives them no strong footing. It’s inaccurate and therefore gives no clear direction.
It’s like finding a specific store at the mall. After you’ve located the “you are here” sticker and the store’s location relevant to that, then the path is relatively easy. However, if either of those points is not well marked, then any attempt at locating it is futile or left up to luck.
The same goes for business. Without a crystal-clear understanding of where you are at and where you want to go, you’re aimlessly walking around a mall looking for the store, figuratively speaking. Define where it is you are now, and where it is you’d like to go, and the steps you need to take will become crystal clear.
If you can get a good handle on these two things, you can turn any business around. No matter the product.
Aaron Webber is a serial entrepreneur and CEO of Webber Investments LLC, as well as a Managing Partner at Madison Wall Agencies.
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