I won’t let your business fail.
I’ve been there & I know how it feels to run a failing or a struggling company.
In 2016 I started my first business. And, by the end of 2017 it failed & was shut down. I still remember the chilling day when I vacated my office.
However, because of that experience I learnt a lot about business success & failure.
Immediately after that (around mid of December 2017), I started a new business. And, that business now (2019) brings me more than $ 20,000 revenue each month.
So, what changed?.
Nothing. I just got a bit wiser as I knew what works & what doesn’t work in a business. I vowed not to repeat the same mistakes.
I started another business soon after the second one in March, 2018. And guess what?. It’s churning out profit from day one.
What were those mistakes that I made with my first business?. Can a struggling business owner turn around her business in straight 100 days?.
Yes it’s’ possible. I’ve shared ALL my learnings over the past 3 years in this post.
Related course: Business Lessons from a CEO (Udemy)
Get ready. You’re about to not only save your company but also scale up quickly.
HOW TO TURN AROUND A COMPANY OR A STRUGGLING BUSINESS
1. Charge Up Your Product or Service (15 Days)
Most of the time entrepreneurs are so obsessed with their product or service that they stop taking customer feedback.
Look, if your product itself isn’t great enough, no turnaround strategy will work. I know it sounds scary but unfortunately that’s the truth. On the other hand, if your product is awesome, your loyal customers keep coming back to buy more from you. Also, you would get a few referrals from them. In short, your business will start growing organically.
So, start collecting customer feedback & improve your product as much as you can.
Example: A SaaS entrepreneur can ask for feedback from her present subscribers & accordingly tweak her SaaS product.
There’re a variety of tools available to collect feedback from your customers. The most easiest being email & phone. Yes, to collect feedback all you need is to email or call your customers & ask a set of product-specific questions.
If you’re in B2B industry then even personal feedback meeting would do.
Yes, improving your product will involve investment of time & money. However, that investment will be refunded with interest in long-run.
Remember, product iteration is a long-term activity. Therefore, you need to earmark at least 15 days for the same.
During the product feedback outreach, you may encounter the following scenarios:
Scenario 1 (Customers say the product is fine but the price is high):
You should be relieved because your customers aren’t complaining about your product (that’s the tough part). As far as pricing is concerned, you can & should work on it (as long as it’s profitable). Focus on volume & see the bigger picture. Selling 100 units at $ 10 is better than selling 30 units at $ 30. Got it?
Scenario 2 (Customers say the product is fine but they want more features)
Consider upgrading your product & offering the same at a premium price.
Scenario 3 (Customers aren’t happy with the product or service)
May be your product isn’t solving the users’ problems. May be your product is faulty or full of bugs. Or may be your product is inferior than your competitor’s.
This is a dangerous situation. Forget about the company & start thinking about your product immediately. Go to your team with the feedback & re-start building the product from the scratch.
2. 10X Your Sales Efforts (7 Days)
In business management there’s a popular saying — “Sales fixes everything”. And, that’s true to the core.
What’s the point of having a great product or service if it isn’t selling?.
Grant Cordone, the business mogul, in his book “The 10X rule” talks about this tip. He says that you can 10X any area of your business (including sales) by 10Xing your efforts. Example: If you’re into sales & making 10 cold calls a day then 10X it & start making 100 cold calls a day. That way you would see an instant jump in your conversions. Simple rule but very powerful. Agree?
But to improve your sales, you first need to track it. So, track the same, benchmark a target & start making 10X effort.
Related course: The Art of Mastering Sales (Northwestern University)
Following are a few more tips to improve your sales:
- Try out modern sales techniques like affiliate marketing, content marketing, viral marketing & funnel marketing etc.
- Cold visit as many prospects as possible (I’ve more than 250 B2B clients in one of my businesses using this age-old technique)
- Polish your customer service
- Try up-selling & cross-selling techniques
Related post: How To Increase Sales Without Changing Price
So, go out there & start selling as much as you can. Don’t stop until you hit your sales target.
3. Slice & Dice The Numbers (10 Days)
Most entrepreneurs ignore the importance of tracking & analyzing their numbers. By numbers I mean the accounting figures of your business (It’s boring but essential).
If you track & analyze your numbers, you’ll get a clear-cut overview of the health of your business. Just like tracking your body’s temperature, calories, weight, etc. gives you a overview of your personal health.
It’s easier than you think. With modern softwares like QuickBooks, recording & analyzing data has become a breeze.
Here’s a screenshot of key metrics from one of my businesses:
Irrespective of the nature of your business, you should track these key metrics:
- Cash flow
- Accounts receivable
- Accounts payable
- Inventory(for ecommerce & retail businesses)
Tracking & reading the aforesaid metrics will help you diagonize your business. With the diagnosis report, you’ll come to know the exact problems in your business.
Example: In my early days of one of my retail businesses, I read my numbers every day. As a result of that practice, I spotted a problem that wasn’t visible from outside — No stock situation of my major products was eating a huge chunk of my margin. So, I implemented ABC inventory system & also set a stock re-order level for each of my major items.
To get started follow these steps:
Step 1: Sign up for QuickBooks
Step 2: Note down the opening balances of your key accounts like bank, cash, account receivable, account payable & inventory.
Step 3: Start recording transactions & monitor your reports everyday
Recommended time frame: I recommend you to track your numbers at least for 10 days. That should be enough to give you an oversight of your business problems.
If you aren’t comfortable with a software then you may simply track your numbers in a microsoft excel worksheet. The point is that — you should not miss this crucial step. Do anything but please start tracking your numbers.
4. Read Cash Flow With Profitability (7 Days)
As per a report, 82% of the small businesses fail because of a cash flow problem.
Cash flow means the cash coming in & going out of your business.
Cash flow consists of two prime elements: Cash inflow & Cash outflow.
Any cash coming into your business will fall under Cash inflow & any cash going out of your business will come under Cash outflow. Example: Payment received from your clients comes under Cash inflow. And, payment made to your vendors falls under Cash outflow.
If the cash inflow is greater than the cash outflow then you’re left with a positive cash balance (as on the end of a given period like month). On the other hand, if your cash outflow is greater than the cash inflow then you’re left with a negative cash balance (or an overdraft).
Needless to say, you should always aim for a positive cash flow. Especially when you don’t expect raising funds from outside investors. Example: The e-commerce giant Amazon could afford a negative cash flow for more than 10 years because it was funded by big venture capitalists. However, not every business is Amazon so you don’t have a luxury of unlimited capital.
Now, let’s switch over to profitability.
As you may know, profit is nothing but the excess of income over expenses. In simple terms the formula of profitability is — Income – Expenses.
For your struggling business to improve, it’s really important that you connect the cash flow with profitability. What does that mean?
Let me explain with a few scenarios.
Scenario 1 (Positive cash flow with negative profitability):
This means that your business is promptly able to collect payments from your clients. However, the expenses are more than income. In such a scenario, your business won’t last long & soon your cash flow will also become negative.
Scenario 2 (Positive profitability with negative cash flow):
This implies that your business is profitable. However, your clients aren’t paying on time.
Scenario 3 (Negative cash flow with negative profitability)
This denotes that your business is in a grave situation. Neither your business is able to churn profit nor it’s able to collect payments on time.
Therefore, a healthy business should have a positive cash flow & positive profitability.
A healthy business = Positive cash flow + positive profitability.
To improve your cash flow you may take the following steps:
- Improve your prices, focus on sales volume & stop giving credit to defaulter clients
- Negotiate a line of credit with vendors
- Offer an attractive cash discount to your credit customers
- Try discounting your credit invoices with your banker
- Reduce fixed expenses (more on this later)
- Reduce work force (Tough situations need tough calls)
- Work out a bank overdraft facility (if possible)
- Improve sales (more on this later)
- Reduce inventory carrying cost
Related post: How To Improve Cash Flow of Your Business
To improve your profitability you may take the following steps:
- Source your inventory stringently
- Avoid the ‘sell-at-any-cost’ attitude
- Cut down the variable expenses (more on this later)
- Embrace the ‘Profit First’ mentality
- Try to differentiate your product or offering (to get rid of competition & charge more for your products)
- Offer collateral product or service along with your core offerings (If you’re selling electronics how about offering installation service to your clients for a fee?)(If you’re an accountant, how about offering an accounting package to your tax client?)
- Arrive at the selling price of your products accurately. Take a help of an accountant if needed.
Related course: Basic Finance for Non-finance Professionals (Rice University)
5. Track Your Working Capital Everyday (10 Days)
In essence, a growing business is nothing but a growing capital. And, a failing business is nothing but a declining capital.
So, what does capital mean?
In accounting term, capital is the excess of asset over outside liability. So, the simple formula is Asset – Outside liability.
Example: If you’ve an inventory worth $ 1000, a cash balance of $ 200, a customer outstanding of $ 100 & a vendor liability of $ 400 then your capital stands at $ 900 ($1000 + $ 200 + $ 100 – $ 400).
A growing capital means that your company is generating strong sales, profit & cash flow.
Here’s a screenshot of how I track capital of one of my businesses:
Following are a few ways you can improve your working capital:
- Avail a temporary overdraft from your banker
- Constantly follow up with your overdue customers
- Improve cash flow
- Improve profitability
- Infuse more money into your business from your personal savings
- Sell needless fixed assets like PCs, furniture, printers, etc.
6. Trim Down The Fixed Expenses (3 Days)
Fixed expenses are the expenses that you incur regardless of the sales. Example: Office rent (You’ll pay this expense irrespective of whether you had enough sales this month).
On the variable expenses are the ones that you incur only when a sales is made. Example: Sales commission (You would pay this only when a sale happens).
Variable expenses aren’t harsh for obvious reason. Fixed expenses, on the other hand, are like business demons. If you aren’t generating enough profit, they’ve the capability to eat up your business.
Therefore, I recommend you cut down your fixed expenses as much as possible.
Here’re a few ways you can do the same:
- Ditch that fancy office space
- Fire a few people (I know its tough)
- Re-negotiate & convert a part of your employees’ salaries into variable (like bonus, stock options, sales commission, etc.)
I want to share a quick little story with you.
With one of my early businesses, I knew I had to keep fixed expenses to minimum from the start. So, when I hired my first employee (after 4 months of running the business all alone), I offered him low fixed salary & high sales commission. Luckily, it worked out well. Fast forward two years, I still follow the same salary model with new recruits(I have 7 full-time sales persons in that business now).
Now, let us a discuss a few scenarios & the possible solutions
Scenario 1: High office rent
Try co-working spaces instead. Or even better you can move & operate your house basement.
Scenario 2: High recurring software subscription cost
Look if you can replace the software with something like google sheet or microsoft excel. With VBA powered microsoft excel, you can run your own little software — free of cost. If you don’t know programming then hire a one-time freelancer to do the same.
Scenario 3: High salary
Offer equity share, profit share or sales commission instead.
7. Instill A ‘Budget’ Culture In Your Organization (3 Days)
A budget is simply a statement that forecasts the income / receipt & expense / payment for a given period of time.
How do you plan to spend or receive the money is covered in a budget.
While you can prepare a budget for any period of time, I prefer to make the same for a week. That’s because a week isn’t too long nor too short to plan for. Whereas if you plan for a month or a quarter there’re chances that your budget may turn out to be different from the actual outcome.
I also recommend you to record your business budget in a journal. And not in a word document. Here’s a picture of my budget journal:
A weekly budget will help you plan & forecast for the coming week. So, it’ll assist you in controlling expenses & focusing on income.
If you’ve multiple teams reporting to you then try making a budget for each team separately. A more healthier practice will be to have a weekly meeting with each of your team for the purpose of preparing the next week’s budget.
A few other advantages of a budget are:
- Keeping you & your team accountable
- Helping you to allocate funds for advertisement
- Helping you to fix a sales target
- Controlling unnecessary expenses
A word of caution: While preparing your budget do not overstate income. In fact, as a practice, I like to under-estimate income or receipt & over-estimate expenses or payment. The logic behind this is that — if your coming week doesn’t go as good as planned you’ll have a cushion to handle the situation.
8. Re-structure Your Team (7 Days)
Your team may be one of the reasons why your business is failing or struggling.
When I built my first business (which eventually failed), I did a huge mistake of only hiring “freshers”. I thought that will help me in controlling salary cost & also infuse innovation/fresh ideas in our company. Contrary of my belief, I found those “freshers” struggling to run the company. They needed training & experience. Obviously, no startup has the time, money or patience to train their team.
Now, I’ve an unwritten rule to hire only domain experts with some experience to run my businesses.
Yes, that’s how important a team is. A simple mistake of hiring a sub-standard employee can ruin your business.
So, how do you create a winning team?. Let me share a few tips:
- Use vetted hiring platforms like Monster.com
- Avoid taking referrals from family & friends
- Conduct in-depth interview & written tests of the shortlisted candidates
- Look for leadership qualities in recruitees
- Prefer a candidate who’s looking to explore & loves challenges
- Look for candidates who agree to your company’s culture & vision
As a part of this restructuring plan, you should also motivate your workforce regularly. A motivated workforce can turn out to be your most valuable business asset.
In fact, in my businesses I haven’t had a single employee churn (except one whom I had to fire because he was involved in fraud) in the past 2 years. Yes, 0% attrition rate!.
How do I do that?. Simple. I keep my workforce always motivated.
You can follow these tips to motivate your own employees:
- Pay them generously
- Don’t be too aggressive with your target. Tell them to focus on efforts instead. Efforts are within their hands not the outcome.
- Sit with each individual occassionally & discuss their issues / problems (or simply for a cup of coffee)
- Encourage team communication using tools like messenger, whatsapp or slack.
- Go for a team outing irrespective of your business results
- Encourage healthy competition & avoid office-level politics
I’ve a sales person whom I hired a year ago. Do you know what profession he was before joining my company?. Selling fish. Yes, you heard it right. And, my business is no way connected to fishing. I hired him because I saw the potential. Once you’ve someone who’s got the requisite experience & fire in her, hire & groom. That’s it. Today that sales person is one of my best performing employees.
Related course: Business Management & Leadership Skills (The Open University)
9. Fix Your Company’s “Leaks” (7 Days)
Leaks mean the loopholes that’re causing losses to your organization or company.
You can subdivide leaks into three prime categories:
- Gross loss
Gross loss is the loss that you incur at the product level (due to low pricing or more direct expenses).
Error means the non-deliberate mistakes that you or your employees can make during day-to-day operations. (Example: Incorrect quotation or calculation)
Whereas, Fraud means deliberate & well-planned concealment of material facts or misappropriation of cash or stock.
I’ve already covered gross loss earlier in this post. So, here I’m going to only talk about error & fraud.
So, why does error & fraud happen?. Is it due to hiring of incompetent staff?. Or is it because of an employee’s greed?
The fact is that error & frauds happen because businesses don’t have proper system or processes in place.
I learnt this lesson the hard way. As discussed earlier, one of my sales person was involved in fraud (cash embezzlement). By the time I discovered his misdoings, he already had siphoned around $ 2000.
Therefore it becomes important for any business to have proper system, processes & checks in place.
Example: A customer payment should need at least two management approvals & a confirmation from the customer over email or phone.
So, start by documenting the processes of your critical business activities like sales, customer payment, vendor payment, purchase etc.
If you’re using a cloud accounting software like QuickBooks, then you can install your processes & check right there.
Having processes & checks not only avoid errors & frauds but also helps a struggling business scale up quickly. How?. Let me explain.
I’m sure you must have enjoyed meals at fast food chains like Dominos, McDonalds or KFCs. What do you think is their most important success factors except funds & products?. That’s their processes. All their branches & stores follow a stringent process for each of their activities. Be it preparing a order, serving or simply handling a customer call. They all have a process. That’s what makes these chains avoid errors / frauds & scale up so quickly.
10. Raise Funds Like A Pro (30 Days)
What if your cash-rich competitors are growing quickly & eating up the market share?. Of course then you too have to scale up fast. In that scenario, you’ll need funds.
But why did I keep this important tip at the last?. That’s because your business is struggling for survival & you should think of outside fund only when your company has come OUT of the survival mode. Makes sense?
So, how do you raise funds? The process is simpler than you think.
Step 1: Become a member in entrepreneur groups like Global Leaders Organization.
Step 2: Participate actively in the groups’ events, seminars, conferences. Meet as many influencers or investors as you can.
Step 3: Pitch your company or idea to the investors or influencers with whom you’ve built a rapport.
Connecting with investors is a long-term activity. Therefore, it requires patience & persistance.
FedEx Survival Story
I’m sure you must have heard or at least used FedEx. It’s a company that revolutionized mail delivery back then 1971.
However, very few people know that after first 2 years in operation, FedEx was about to get bankrupt with only $ 5000 left in the bank.
Then the FedEx founder Frederick Smith decided to take the $ 5000 & risk the same for a blackjack (card gambling game) in Las Vegas. Luckily, he won & got $ 27,000 as return. That was enough to keep the company floating for a few days. And as we say the rest is history.
I’m not suggesting you to gamble. The moral of the lesson is — funds are important.
11. Prepare A Business Turnaround Strategy or Plan (Optional)
If the aforesaid tips sound overwhelming to you then I recommend you to create a simple business turnaround plan.
Take a piece of paper or open a word document & start creating a 100 days roadmap using the tips discussed. A simple flowchart function would do.
12. Bulk-Execute The Turnaround Plan Flawlessly (Optional)
Yes, you can simultaneously implement the aforesaid ideas to reduce the turnaround time (specially when you’ve a big team).
Bulk executing all ideas at a time can be risky. So make sure you’re coordinating your delegated plans well.
I know it’s tough. Running a business & making it a success is challenging.
But you’re destined to run a successful company. Do not give up so soon. There’s always a solution. You’re still in the game. Keep fighting.
The aforesaid tips are tried & tested my me with my own businesses. So, get started. Start with the first tip right now. And, I’m sure you’ll be surprised with the result.
You’re just 10 ideas away from running a ailing company to running a successful company.
Rise up & stop not till the goal is reach.
Related course: Secrets of Successful Small Businesses (LinkedIn)
What do you think of the aforesaid ideas?. Please comment below. I like healthy discussions.