My Business is Failing – How Can I Turn it Around?
The failure of a business can be catastrophic for its employees, creditors and suppliers, but especially for its owners and directors. If you have incorporated your business then at least you have the peace of mind that your personal assets will not be at risk. However, the likelihood is that you’ll still have invested significant amounts of your own money in the business, and if it fails, all that will be lost.
The good news is, if you’re reading this post, you’ve already taken a very positive step. It means you’ve recognised the warning signs that your business is failing, you understand that things need to change and you’re willing to take measures to turn it around. All too often, business owners bury their heads in the sand and convince themselves that their situation will miraculously resolve itself, simply because the reality is too much to face. Inevitably, that leads to the collapse of the business.
Why is my business failing?
There’s an almost unlimited number of reasons why your business might be failing. To understand your situation more clearly, you should meet key stakeholders in your business such as senior employees, your accountant and your business advisor. In many cases, as the owner or director, you are too close to the business to see where the faults lie. Consulting these stakeholders will provide additional perspective and help you understand what’s really going wrong.
Common reasons for the failure of a business include:
- There’s not enough demand for your products or services
- You’re not meeting the needs of your customers
- There’s no proven revenue stream
- The business is growing too quickly
- You’ve moved away from your core operations
- You’re spending too much money
- You’re unable to maintain a healthy level of cashflow
- You’re not keeping proper accounting or tax records
- The location of the business isn’t right
- There’s little or no business planning
- Your marketing is ineffective
- You’ve made the wrong hiring decisions
- You’ve gone into business with the wrong people
- The business isn’t profitable in its current form
- You’re struggling to collect payments from your customers when they’re due
With so many different reasons for the failure of a business, there isn’t a one-size-fits-all solution to turn it around. However, there are a number of proven rescue strategies that will help to keep your business afloat.
How to turn around a failing business
(1) Cut unnecessary costs
Ultimately, the reason almost every business fails is because it’s not making enough money. Whatever the reason for your business’s struggles, a good place to start is by reducing your unnecessary costs. Although this will not save the business by itself, it will buy you more time to uncover and deal with the real problems you’re experiencing.
There are several steps you can take to reduce the costs of your business:
- Reduce your office space costs by moving to smaller premises, letting out space you don’t need or letting employees work remotely
- Cut staffing costs by letting non-essential members of the team go
- Renegotiate with existing suppliers to reduce the cost of raw materials
- Reduce the amount of non-essential travel you and your team do
- Reduce your marketing efforts or switch to less expensive forms of marketing (as long as you can do so without detrimentally impacting your revenue)
- Limit the products and services you offer and focus on the most profitable work
- Gain control of miscellaneous spending
- Eliminate low-value meetings
These are just a few of the steps you can take to reduce your costs. You should have a good idea where your business is leaking money, and if you don’t, speak to your accountant immediately.
(2) Listen to your employees
One unhealthy trait many business owners have is to only consult their senior managers when the business is struggling. However, asking your ground-level employees for their input will give you insights that senior managers can’t provide. Employees will be able to tell you what customers really want and need, where the business is failing to meet those needs and where operational bottlenecks lie. Knowing that their views about something so important are valued will also help to keep them motivated and engaged, which is vital at such a critical time.
(3) Focus on profit, not revenue
There are lots of businesses that can bring money in easily enough but only manage to keep hold of a very small proportion of it. Reducing your nonessential expenditure will help to increase your profit margins, but there’s still a lot more you can do.
When your business is failing, the tendency is to take on as many clients as you can, but it’s often the case in business that more profit means fewer clients. Every business has clients they take on that pay very little but demand a huge amount of time. For a lot of failing businesses, letting these clients go, even if that means a temporary dip in revenue, can help to put you back on the road to success. That time wasted servicing unprofitable clients can then be sent identifying and targeting the high paying, high-quality clients your business needs.
(4) Put your customers first
The survival of your business is dependent on your ability to understand your customers and fulfil their needs. Too many businesses provide the products and services they want to offer, rather than listening to their customers and creating the products and services they need.
Engaging your customers to discover what they truly want from your business and making client satisfaction a priority is a big step in the right direction for many failing businesses. You can then align your product model and marketing plan to make sure those demands are met.
(5) Seek alternative forms of finance
If your business model is viable but you lack the capital to make it work, there are some alternative finance streams you may be able to access to unlock the funding you need. A business that has fallen on hard times may not be able to access a business loan from a bank or an overdraft. However, when you need to pay suppliers and employees, settle a tax bill or increase cashflow during a time of seasonal low sales, it’s important you have some form of finance you can turn to.
Invoice finance, asset-based lending and merchant cash advances are all popular options for many businesses that may have adverse events such as County Court Judgements (CCJs) on their credit record or do not meet the typical lending profile of banks and other lenders. This type of cash injection can ease your worries and help you ride out the financial storm.
(6) Consider company rescue options
If you’re committed to your business, are confident it’s viable and are willing to work hard over the long-term to keep it afloat, there could be a number of company rescue options that are available to you. These can be accessed by contacting the insolvency practitioners here at AABRS or by going direct to HMRC if you have a tax bill you’re struggling to repay.
- Time to Pay Arrangement – If you have a tax debt that’s jeopardising the future of your business, it is possible to reach an agreement with HMRC to repay the debt in instalments over a longer period (typically 12 months). This sort of agreement is called a Time to Pay arrangement. It is perfectly suited to viable companies that have a short-term cashflow problem that’s putting their survival at risk. Time to Pay arrangements can be made for all tax debts, although they’re most commonly used for corporation tax, VAT and PAYE.
- Company Voluntary Arrangement (CVA) – If you are struggling to repay your debts, are under constant pressure from your creditors and are even facing threats to wind up your business, a CVA could be the best approach to take. A CVA is a formal payment plan to repay your creditors all or part of the money they are owed over a period of between one and five years. During that time, creditors cannot take any legal action against your business and any interest or penalty charges on your debts will be frozen. That could buy you the time and space you need to restructure the business and trade your way back to financial health.
- Administration – For larger companies, entering into administration will put a pause on all legal action by creditors so the business can be restructured and saved. The administration can last for a period of up to one year. During that time, the administrator will conduct the affairs of the company and explore all the options to keep it afloat.
Do you Need Help to Save a Failing Business?
At AABRS, we can provide expert advice and implement the rescue procedures to save your failing business. Just get in touch for a confidential, no-obligation discussion of your circumstances. We’ll provide a free initial consultation to help you understand your options.