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Are you a business owner? Is your business failing to make money?
One of the hardest parts about being a business owner is seeing your company struggle. There are many reasons why a business might fail, but there are ways to come back from these pitfalls.
Let’s look at how to save a failing business and turn things around for the better.
How to Turn Your Business Around
Your business is your life’s work, so it’s disappointing to see that it’s not as successful as you hoped. If your company is heading downhill, it’s time to take action. By following the methods below, you’ll give your business a second chance at success.
Find the Problem
Before you can start fixing your failing business, you need to identify what the problems are. Perhaps the easiest way to get to the root of your business’s issue is to seek out feedback and learn from it. Typically, when we ask for feedback, we seek people who are somewhat at the same level of expertise and experience as we are, or ideally, who are ahead of us. Sometimes, though, it’s useful to seek the opinions of those behind us in experience or expertise. According to Thanks for the Feedback by Douglas Stone and Sheila Heen, you should get feedback from employees that might have an idea of what the problem is.
Some of the best forms of coaching can actually come from your subordinates, who can see your blind spots and how they affect people at all levels around you. They are hyper-aware of any inconsistencies in your messaging and anything that creates extra work for them.
Actively seek out input from those below you to get a sense of why your business is failing. Establish concrete ways in which people can approach you with insight. Consider establishing “reverse mentorships” with one or more people at several levels of the organization, who you trust to alert you to concerns from different departments or offices of the company. Your goal when seeking feedback as the boss is to discover how your priorities are and aren’t affecting all parts of the organization, and to look out for unintended effects of initiatives.
Redo Your Business Plan
You might already have a business plan in place, but if your company is failing, it might be worth scrapping it and starting a new plan.
Instead of making more work for yourself for little benefit, make a one-page business plan that can help you outline your solution to a failing business, using the following format from The $100 Startup by Chris Guillebeau as a guide:
- What do you plan on selling?
- Who do you think will buy it?
- What problem does your business solve?
- What do you plan on charging?
- How do you plan to process payment?
- Are there other ways that this product will bring in income other than direct sales?
- How will people find your business?
- How can you incentivize referrals?
- Measure of Success
- This business will be successful when it has ___ number of clients or makes $__.
- List 3-5 concerns or questions about your business and offer solutions to those concerns. For example, if you’re building an online kitchenware store, your concern may be, “How do we ensure fulfillment of purchases?” Your solution may be, “We plan on subcontracting a local warehouse to store our excess inventory and oversee the delivery process.”
- We want to achieve our goals by ________.
In addition to your business plan, you should form a mission statement, or an explanation of the central values upon which your company is built. This statement should be no more than 140 characters and should explain in simple terms how your business can help people. This will help everyone at the company stay on the same page so they can drive the company toward success.
For example, if you run a daycare center, your mission statement may be, “I help working parents feel comfortable with using a daycare center by giving their children personalized, quality care during the workday.”
Understand Your Target Market and Customer
Maybe your issue is that your product or service isn’t selling to the people who want it.
To create a profitable business strategy, you first need to define your target market. In Guerrilla Marketing, Jay Conrad Levinson argues that many businesses waste time and resources trying to get attention from customers who have no interest in what they have to offer. Knowing specifically who you’re selling to helps focus your marketing efforts on interested customers—thus contributing to increased sales and profits.
He suggests answering two questions to define your target market:
- What are you selling? Describe your product or service and the benefits it provides. For example, you sell ergonomically designed office chairs that offer maximum comfort.
- Who are you selling to? Define your target market by considering who wants the specific benefits your product or service provides. Narrow down to make this group as specific as possible. For example, customers in your target market work from home, suffer from back pain, and shop online.
Research Your Target Market
Once you’ve defined your target market, conduct market research to understand this customer group’s specific interests and priorities. According to Levinson, the more you understand your target market, the easier you’ll find it to appeal to these customers and influence their purchasing decisions.
Levinson suggests that you should find out as much as possible about your target market, including:
- What motivates their purchasing decisions. This information reveals what aspects of your business, product, or service your marketing strategy should emphasize to maximize your appeal. For example, your target market’s primary motivation is to find an inexpensive way to permanently relieve back pain.
- Which businesses they already purchase from. This information reveals who your competitors are. Comparing your product or service to what these competitors offer helps you focus on what you should do to differentiate your business and appeal to customers. For example, your target market shops primarily on Amazon.com and only buy from companies that offer free delivery. Therefore, you analyze how your product and customer service policies compare to those offered by competitors offering free delivery on Amazon.com.
- What media they engage with. This information reveals what marketing channels you should focus on to reach your target market. For example, your target market spends a lot of time on Facebook and Instagram. Therefore, you analyze the different approaches marketers use to exploit these two platforms and create a list of possible marketing methods you can use—such as inserting ads, using affiliate programs, and hiring influencers.
Inexpensive Research Methods
Many businesses spend vast amounts researching ways to reach and appeal to their target market. Levinson claims that, while paid research does provide useful data, there are cheaper ways to find the information required to understand your target market.
In the meantime, he suggests three low-cost methods to research your target market:
- Refer to research reports, customer opinion polls, and industry studies: Find these online or at your local library.
- Survey existing and potential customers: Prepare questionnaires and entice responses by offering discounted products and services or free gifts.
- Search online for additional information: Visit chat rooms, competitor websites, and online marketplaces to gain additional insights about your target market.
However, one drawback of relying on these low-cost methods is that they take more time. Therefore, Levinson suggests that you switch to paid research methods once your budget accommodates them.
Increase Your Brand Presence
Now that you know who you want to sell to, it’s time to invest in some memorable marketing strategies. Even if money is tight, these marketing methods could help bring in more revenue because of how easily people will see your business through advertisements.
Because consumers only think about a select few brands when deciding which to purchase, How Brands Grow by Byron Sharp claims that the most effective way to market your brand is to increase the likelihood that consumers will think about it.
Sharp proposes three main ways to influence consumers to think about your brand:
- Advertise regularly to create brand memories.
- Create recognizable brand assets and keep them consistent.
- Expand your brand’s reach to increase its visibility.
Strategy #1: Advertise Regularly
First, Sharp recommends advertising regularly. Advertising works by prompting consumers to create and maintain memories about your brand. If a consumer encounters your brand in the future (or anything that reminds them of your brand), they’ll remember your commercial and will be more likely to consider purchasing. For example, even though it’s unlikely that a Chevrolet or Toyota television commercial will convince someone to immediately go out and buy a car, the advertisement makes it more likely that they’ll think of the brand the next time they need to buy a car—months or even years in the future.
Since advertisements work by triggering memories, Sharp asserts that the best advertisements grab the audience’s attention and engage them emotionally, making the advertisement more memorable. Memorable advertisements work well even if they’re not logically persuasive. Ads do, however, need to prominently connect to the brand in a memorable way. If the audience doesn’t register which brand the advertisement is promoting, they won’t remember the ad when the time comes to choose which brand to buy.
Strategy #2: Create Recognizable Brand Assets and Keep Them Consistent
Second, Sharp recommends creating recognizable brand assets. These are symbols associated with your brand—for example, a recognizable logo and color scheme, and a memorable brand name. Whenever a potential customer recognizes any of these assets—for instance, spotting them at the store—they’ll recall positive memories of your brand (interesting advertisements, past purchases, and so on) and will be more likely to buy.
For this reason, Sharp argues that it’s important to keep these assets consistent throughout your brand’s lifespan. Changing your brand assets reduces the chance of your audience immediately recognizing them, removing the link to past experiences and making it more likely that their mental filter causes them to ignore your brand entirely.
Strategy #3: Expand Your Brand’s Reach
Third, Sharp recommends expanding your reach and selling through as many channels as possible to increase your brand’s visibility. Whenever someone notices your product on the shelf at a store, or listed on an internet search, it triggers their memories of your brand and increases the chance of them making a purchase.
For this reason, when you expand somewhere new, do whatever you can to make your brand easier to notice. For example, fast food restaurants use large branded signs to grab hungry drivers’ attention and convince them to stop there for lunch instead of at their competitors.
Reframe Your Expenses
In Profit First, Mike Michalowicz recommends that you reframe the way you think about your monthly expenses—as an individual piece of your business’s finances that will change over time, rather than as a static amount that must come before everything else. This will make it easier to recognize and accept which expenses need to be cut.
To reframe your expenses, he advises that when determining how much money you need to keep your business running, don’t just calculate your monthly expenses. Instead, calculate the income you’ll need each month to pay yourself a consistent salary, keep your profits up, and pay expenses. This way you still know how much money you need to keep your business running, but won’t put expenses as your first priority.
When you do your accounting this way, you can also check on your business’s financial health just by checking your salary deposits into your personal account. This works with an existing habit, as just about everyone checks their personal bank account balance regularly. Here’s how to recognize how much income you need by checking your personal bank account:
- Take your monthly personal income needed to keep a consistent salary and divide it in half. This represents the habit of allocating your income twice a month.
- Divide that number by your salary allocation percentage. The result is the income your business needs to generate every two weeks to meet your personal financial needs.
- Multiply that number by 24. This is the income your business needs to generate each year.
- Compare your salary deposits to these numbers. If they are consistently lower than your required amount, then you know your business’s income is down. If its balance is higher than the required amount, then you know your business’s income is up.
Don’t Get Complacent
In Our Iceberg Is Melting, John P. Kotter and Holger Rathgeber emphasize that any improvements you make to your business might not be permanent. The last obstacle you have to overcome is planning for the future. There’s always a chance that your revamped business will eventually be threatened too.
Never Stop Improving
The lesson is simple: Your job isn’t done just because you accomplished your goal. You have two things left to do:
- Make sure that the changes you’ve made are going to stick.
- Be ready to undergo this whole process again.
The world is constantly changing; you must be ready to change along with it.
The Last Resort: Selling Your Business
It’s not ideal, but handing the keys over is a last resort if none of the above strategies help your business.
To sell a company, John Warrillow’s book Built to Sell lays out a step-by-step process, which involves finding the right advisor to help you sell and accepting a good offer.
Find the Right Company To Help Sell Your Business
When you want to sell your business, Warrillow claims you need to find a professional advisor to help with the sale. When searching for an advisor, there are two key aspects to consider: the size of the firm and their knowledge of your business specialty.
Finding a broker or firm that’s the right size for your business is important because it ensures they’ll have the right contacts and appreciate your specific needs. Warrillow advises using a business broker if your company does less than $2 million in annual sales, and a merger and acquisition firm if it does more than that. If a broker is too small for your company, they might not be able to find the companies that would give you the highest offer. If a firm is too big, they might view your business as less important than their bigger clients and not put in the effort to find the most suitable buyer. Instead, they’ll simply look to sell your company as quickly as possible, take their cut, and be on their way.
Your advisor should also be well-acquainted with the industry your company specializes in. If it’s not, you run the risk of them overlooking or underappreciating the potential value you bring to that particular industry.
Accept An Offer
The final step in selling a business is to accept an offer. Warrillow recommends knowing exactly what you want from a deal. This will make the decision easier. For example, have a minimum amount of money you’ll accept up front, with any performance fees or add-ons seen as a special bonus. Knowing exactly what you want will help you stand firm if your business broker pushes for you to accept a lower deal just so they can get paid and move on.
Additionally, be aware that when a company agrees to buy your business, they’ll want to do due diligence, and this can be a painstaking process for all involved. The due diligence process usually lasts about two to three months, and the buyer will carefully review every aspect of your company with a microscope. It’s not uncommon for a company to decrease its offer or pull out of a deal entirely after they’ve combed through your business. Don’t be discouraged if this happens, and stick to your guns if they offer less than what you think your company is worth. After all, the reason you’re selling your business is because it’s not performing well and you may have to take any offer that you can get.
After implementing these solutions to your failing business, you should see some noticeable improvements. It’s important to remember that the business economy is constantly changing and it’s important to stay vigilant and not become complacent.
Are there other ways to save a failing business? Let us know in the comments below!
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