Is your small business circling the drain?

There are a lot of reasons why small businesses fail. Mismanagement, lack of positive cash-flow, poor hiring decisions, regulatory constraints, no long-term planning, under-capitalization and the list goes on. So what do you do if you see the downward spiral and want to turn things around?

First, stop digging…

As the saying goes, “If you find yourself in a hole, stop digging!” Many small business owners don’t take time to fully assess a situation and often confuse the symptoms of a problem with the real problem. This is normally caused by a lack of data or poor data quality. Many small businesses don’t keep track of the financial aspects of their business. They don’t track marketing efforts and set goals and benchmarks to monitor sales campaigns. In many cases, owners even fail to keep track of who has been invoiced and who has not paid.

If any of these examples describe your business, you will find it difficult to “stop digging” and analyze the business to find the root cause of the downward spiral. Without knowing the cause, you can’t implement corrective action.  Simply working harder using the same processes that put you in a bad position, will not solve the problem.  At some point, you have to stop what you are doing and ask yourself if the effort you are putting forward is digging a deeper hole or building a ladder toward the light.  In my experience, the first rung on the ladder begins with a detailed review of your business’ cash-flow. If you follow the path of every dollar going through your business, it will normally lead you to the areas that are successful and those that are dragging you down.

Reset your game plan…

Obviously, if the business is tanking, the game plan you started with (which may have been no plan at all!) is not working. You need to determine what part of your original vision is working and which parts aren’t. This will be difficult. Entrepreneurs get married to their ideas and the business becomes their baby. Changing the vision or the path of a business means admitting their baby is ugly.  Nobody wants to do that! The fact is, you have to be willing to change directions, seek new opportunities, hire people smarter than you and fire people who are toxic to your organization.  These steps will be difficult but they are reality when resetting your business’ game plan.

Seek input from others…

If you have employees, they probably aren’t oblivious to the fact that the company is doing poorly. In fact they may know exactly why the business is circling the drain and have good ideas on how to fix it.  Just because you are the owner, doesn’t mean you must have all the answers. Reach out to your staff, peers and business advisors to find a fresh take on your business. Many times it isn’t a major epiphany that rights the ship, its more about fixing the little things that gets things back on track. Reducing inventory loss, improving customer service, revisiting who the target market should really be, and formalizing processes that have gone awry may seem trivial when the business is falling apart but sometimes, these small steps result in great strides toward turning a company around.

Slay the internal dragons…

So, you are standing at the door to your office, keys in hand and literally shaking out of fear of failure.  Everything you have worked for is on the brink of burning down around you. What do you do?  Fear and self-doubt are natural and in many cases warranted.  The key is not to sweep it under the rug and continue on as though nothing is wrong. You must turn the fear around and use it to your advantage.

Chances are, when you started the business, you were scared. You didn’t know if your idea would work, you weren’t sure you could pay your bills and cash seemed to vaporize before your very eyes.  Did you quit? NO.  You kept the passion you had for the business alive and turned that fear of failure into incentive to succeed.  It’s time to do it again.

Re-kindle that passion. Reset your priorities and focus on taking the first steps out of the hole you are in. You may need to work with others to bolster your confidence, you may have to come to grips with the worst-case-scenario and plan your way through it but, you have to go into the journey to repair your business with a positive attitude and commitment to the plan.  Even if that plan is an orderly closure of the business rather than the crash-and-burn scenario you are facing.

Facing a scenario where your business is not everything you hoped it would be is difficult. Allowing that situation to take you down financially, physically and mentally is just not acceptable. The history of business is full of stories of multiple (and miserable) failures.  The entrepreneurs who were able to assess their situation and use solid data to reset their vision, emerged stronger. In many cases, they surrounded themselves with people who could help both operationally and emotionally pull them out of the hole they were in and re-energize them to fight off the internal dragons that would have otherwise caused them to give up.  Righting a business gone bad is not an easy task but, with confidence, a new plan based on good data and a little help from your friends, you might just be able to pull it off and become stronger and more successful than you ever imagined.

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Posted in Business Planning & Strategy, Editorial Comments

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