Turning a declining business around involves making hard calls.
Businesses go into decline for a large number of reasons, often all happening at once. Usually, a business goes into decline due to factors that are outside of your control.
If you are in a position where your business is going downhill, you need to take an objective look at all aspects of your business to decide if it can be saved, if it is worth saving, and what you need to do next.
Sometimes there is nothing you can do that will repair this situation. In those cases you are best to look at selling your business, or closing down gracefully. The objective then is to close down as painlessly as you can.
Either way, you need to do a thorough assessment of your business to understand what your best options are and, sometimes, to convince others that there is something to save.
It is important to know that there is no cavalry. Nobody is going to arrive with government funding to fix the problems you have so you need to bite the bullet and do what needs to be done.
Make sure you are well informed about what your actual situation is and make decisions quickly. Delays tend to just make things worse.
While you are going through this process, look after yourself. Running a declining business is extremely tough so make sure you are getting help if you need it and are taking the time for some self care.
External factors that can cause your business to decline may include:
Internal factors can include:
If you are experiencing any of these factors, bring in outside expertise. Have a talk with your business representative at the bank, talk with your accountant, bring in a business coach. It is worth the cost if it helps you to work out what you need to address to get your business back on track.
Unless you are able to work out where your business stands it will be increasingly difficult to find a solution. Make sure you have a really solid grasp on all of your incomings and outgoings on a regular basis (at least monthly) and use that to put together a realistic cashflow forecast. Your accountant can help you with that. It pays to listen to what they say, even if you don’t like what they are saying. A good cashflow forecast will help you understand the impact of saving money, raising prices or increasing activity.
You should have a good knowledge of:
• Your sales levels
• Your assets and liabilities
• Your profit and loss
• Any forward work you have
• Staff liabilities
• Your personal assets and wealth
There are a number of tactics to try and reverse a decline in business, but all of them have one thing in common – you need to know your numbers. Sometimes the solutions can be counterintuitive. To make sure you are having the greatest impact we recommend bringing in an expert to help you identify solutions you should take and to work out what the optimum level of change is.
Some potential solutions are:
Sometimes putting a solution in place costs money. This is where hard decisions need to be made. If you are able to source the money you need, will it actually fix the problem or will it just put you in further debt? No matter what solution you put in place, you need to be able to see that doing so will give you a clear path to profitability.
If none of the above solutions look likely to work, you may need to consider closing or selling your business, pausing your business or finding another income stream to survive (such as a part-time job).
How to close your business
If you do not have the money month-to-month to pay your bills then you are putting yourself in a very precarious position. Businesses are built on relationships and if you cannot pay your staff or suppliers you may lose the ability to operate. You could also be held personally liable if you are found to be trading while insolvent, with very serious penalties.
Some methods to retain cash are:
If your business is declining it is very unlikely that anyone will be willing to lend you money or invest in your business unless you are able to show a very clear path to profitability. During a disaster situation the government will sometimes provide some emergency grants to businesses but there is no government funding to help with a lagging economy or businesses that are not performing as you want them to.
That said, there are methods to raise money but you need to be very sure that you are not just delaying the inevitable.
A list of methods to raise money is listed on our Funding and Investment page
Funding and Investment Sources
It can be very easy to forget your own wellbeing when you are trying to rescue a declining business. It is so very important that you take the time to look after yourself. You will not thank yourself if you push yourself to a breakdown.
The Brave In Business e-learning resource is an excellent repository of information to help you look after your greatest asset.