Many entrepreneurs experience failure. Sure, the best bookkeepers can keep your financial records up to date, but things can still fall apart. This is because unforeseen external (and internal) forces can create hurdles that no one can prepare for. This is an inevitable risk of doing business, and many business owners give up on their company or desperately seek strategies to revive it.
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While failure is sometimes unavoidable, giving up shouldn’t be. There are ways to bounce back and keep your business steady, even during tough times.
Reviving a Dying Business
Failure is always a shock, but it doesn’t have to be the end. Instead, make this time in your career the start of much greater success.
Of course, it’s better if you can recognize signs of distress early and rethink your strategies while there’s still time to recover. Bringing your dying business back from the brink is possible if you understand that bankruptcy isn’t inevitable. You may have to make some tough decisions, but the result is worth it.
Here’s a step-by-step guide to getting you back on the road to success:
Honestly Evaluate Your Situation
Whenever a disease needs to be diagnosed, the patient is kept under close observation and various tests are performed. You need to handle your dying business in a similar fashion to understand what got it into trouble in the first place and how to heal it.
To do this, you need a brutal and honest evaluation. Until you know the cause of the problem, you can’t take steps to fix it.
Take entrepreneur Elon Musk. His SpaceX project has endured many failures, but he took time to evaluate what went wrong. A seeming failure can pave the way to success if you analyze what went wrong and keep pushing.
Rethink Your Strategy
After reevaluating your company and identifying its problems, redefine your strategies. If you don’t want to give up, this is the biggest step – and hardest decision – you will take to revive your business.
Let’s reference another famous entrepreneur: Steve Jobs. He constantly strived to better serve the world. To do this, he often had to rethink his products. If you look at Apple’s history, it went from a company on the brink of shuttering to the brand it is today, says Forbes.
Ensure a Positive Variable Contribution
This step revolves around the concept of contribution margin which is used to analyze your products’ profitability.
In simple terms, you need to ensure that the cost to the consumer exceeds that of delivery. If you offer multiple products or services, you need to do this for each.
If your business charges customers differently, you also need to analyze the situation at the customer level. Notice any negative variable contribution and either increase the price or reduce the manufacture or delivery cost. There can be exceptions to this rule, but in general you need to make more money to cover your overhead costs.
Another strategy is to ensure you aren’t using your best (and best paid) staff and resources on assignments that could be handled at a lower cost by other employees. After all, you don’t want their cost to exceed what your company charges per hour. Always match the right employee to the needs of the client.
This is an obvious way to keep your company afloat in tough times, especially if you’re having trouble paying bills and business is slow. If you can’t increase cash flow, reduce the amount of cash flowing out.
To do this more efficiently, cut back on discretionary spending. That means pausing hiring and keeping expenditures to a minimum. Maybe rent instead of buy office space and new equipment, or put off painting your office or planning a new one.
You will likely need to cut payroll costs as well. You may not need to lay anyone off but instead temporarily cut back on salaries and hours.
Focus on Your People
No matter how important the machinery, software or data, it’s people who run the business. Employees are valuable assets for any business. When a company is failing, you need to focus not just on strategies but on the people who will be implementing them. In hard times you may have to let go of workers who slow you down. And while this may seemingly contradict our previous point, hiring people who can help revive the business is worth the investment.
Never let your passions die. You can manage your expenses better with up-to-date bookkeeping services, the best bookkeepers and focusing more on your accounts receivable and payroll. The entrepreneurial spirit is important and passion will give you the energy you need to push towards success.