Sometimes economic events happen that are out of your control which may cause financial challenges that lead to business loss. Perhaps the banking environment changed, and you no longer have access to a line of credit that allowed you to service your biggest customer. So you lose that customer, costing you revenue that leads to other business challenges, like the inability to meet payroll.
In other circumstances, perhaps you make one or more business decisions that don’t have the positive outcomes you expected, and you lose money. Those choices might include partnering with or hiring the wrong people, keeping a troublesome customer too long, or investing in the wrong business assets. Those decisions may cause cash-flow shortages that make keeping your business afloat difficult.
When financial challenges in your business lead to loss, staying in business means you must quickly pivot. Like larger enterprises, executing a business turnaround may be all that saves your business. But that requires a series of skills, strategies, and tools most small-business owners don’t have. Here are some steps to take that can help turn around your business after a financial loss.
1. Face Your Situation Honestly and Get Support
Some small-business owners, especially those who’ve made business mistakes, may not want to face the truth about their company's condition. Though hardly alone in finding themselves in this position, they’re perhaps embarrassed about their situation. But financial challenges can be common in business, and business owners must confront theirs confidently.
“Being honest about your business situation is crucial if you’re going to stay in business,” says Marc Parham, director of The Entrepreneurship Center at Urban League of Greater Atlanta. “Take the emotion out of the equation, so you can evaluate what happened and begin fixing your business,” adds Parham, who also owns a small-business development consultancy.
Patti Larson, CEO of SunUp Group, which specializes in turnaround management, agrees. “Don't be afraid to pivot swiftly,” she states. “Once you know something is not working, cut your losses and try new strategies.”
This also isn’t the time to be the smartest in the room, either, so ask for help. “Soar with strengths and manage (or outsource) your weaknesses,” Larson says. “Outside, objective perspectives may prove brilliant, so surround yourself with colleagues, partners, and consultants who are smarter than you.”
“A paid consultant who just focuses on your business has a vested interest in doing work to get you to a better place,” explains Paige Oldham of Mindful CFO, which provides fractional CFO services.
2. Deal With Immediate Cash-Flow Issues
If you have payroll to make or rent to pay, you’ll have to get resourceful to keep cash on hand or bring in revenue quickly. It can be critical to figure out how to do more with less. One question to ask: where can you cut costs immediately?
Oldham shares questions she asks her clients when looking over their financials in a situation like this. She explains, “When a company is tight on cash, I'm looking at their weekly, sometimes daily, cash projections and asking, ‘What can we keep doing? If we lost 12 of our 15 customers, how do we downsize to accommodate the remaining three but work toward getting new customers?'”
Oldham gets her clients to think about what they can deliver to clients with what they have. Whether it’s implementing new software to complete tasks people did before, or communicating with the market differently to achieve a wider reach to get new customers, she says, “It takes getting creative, which is where many people have a hard time.”
But if you’re having trouble being creative, bring in a strategist that can help you think through the answers to these questions to get your business back on track.
3. Restructure Your Back Office If Necessary
Many small-business owners don’t have their business structured to address emergencies, especially to manage finances and people. “I’ve dealt with a number of businesses that don’t have their back office in place,” says Parham, who helps with small-business turnarounds. “They don’t have their accounting set up,” he explains, “so they can’t provide financials to the bank, if they need an emergency business development or operations loan.”
Don't be afraid to pivot swiftly. [...] Once you know something is not working, cut your losses and try new strategies.
—Patti Larson, CEO, SunUp Group
He watched businesses go under during the pandemic, because although they were eligible, they couldn’t take advantage of PPP loans. They lacked the proper financial records to qualify for rescue funds. “A lot of businesses were operating from spreadsheets and payment app records,” he states.
Parham adds, “Many small businesses don’t have properly established HR functions, so they can’t hire, keep, and manage qualified personnel or fire unqualified people.” They also don’t establish the right parameters for entering partnerships with other people or organizations, which leads to costly trouble, he explains.
You also may need new infrastructure, technology, machinery, and equipment for operations for your turnaround to work. “Whatever your business is, invest in whatever it takes to pivot,” says Oldham.
Without instituting back-office functions correctly, small businesses struggle when they face turning around their business. So, it’s essential to address these issues immediately to prevent more losses.
4. Ramp Up Marketing and Sales
Your financial challenges may be from customer loss, but Larson says, “Don't chase lost clients, but spend time attracting new clients.” Start with the reason you’re in business, she says. “Reposition your brand, conveying in your messaging "why" you're in business and go deep into what differentiates you,” she adds. “It may be your values that make your company or product unique.” Maximize digital marketing for this purpose. "Business cannot exist without digital marketing," she says.
But this also is another place you can get help if marketing is not your area of expertise. You’ll need a professional adept at marketing and messaging concepts to help to execute an effective marketing strategy when you’re in a business turnaround. Otherwise, you may make mistakes or miss multiple opportunities to gain new clients, especially with digital marketing.
“Most small-business owners are salespeople or visionaries who don’t understand sales isn’t marketing,” says Oldham. “They don’t know what marketing is, and don’t know its possibilities, so do limited marketing, like sending an occasional email or placing ads in the paper,” she says. But marketing supports sales activities and having powerful marketing tools and a professional campaign is necessary to bring the right customers to your business.
Parham sees another challenge with small-business owners. “Many small-business owners engage in digital marketing activities like launching Facebook Pages or websites, but they don’t ask directly for sales with their promotions,” he explains.
“They hope potential customers will see their marketing and decide to buy from them without them prompting them with calls to action or other sales tactics,” he adds. “You must know how to close sales and many business owners don’t, so the customers don’t come.”
Getting the right marketing and sales consultants in place to support your turnaround efforts is imperative, or they’ll falter.
5. Build or Rebuild Your Network
One of the most effective strategies for business building or rebuilding is networking, but not just at events specifically for that purpose. Those can be uncomfortable for many business owners. Instead, join professional affinity groups, whether on social media or through paid professional organizations.
Maximize this strategy by getting involved in those groups and building relationships with other small-business owners by exchanging help, support, and resources with each other. Oldham gives the example of membership in an industry association for her state where other CFOs also are members. “We talk to each other all the time, and help each other any way we can,” she explains.
“Nobody's charging for help," she continues. “You just help each other, because that's the thing to do.” As a blogger, she joined Facebook Groups where members helped one other build their audiences, even driving traffic to each other’s blogs. “That help is indispensable,” she says.
But your network also can be of local businesses. “You can see each other as competitors or partners,” says Oldham. She illustrates what restaurants did during the pandemic. “Most restaurants found themselves in the same situation – unable to open their doors to customers,” she says. “So, they collaborated and developed strategies to provide drive-up service to their customers to keep their doors open.”
No matter what you do for business, you can build or join these networks. In times of distress, they may be your most helpful resource and provide vital support.
What turnaround methods you undertake depends on your business and industry, but these can provide a sound starting point for any business. Bring in support, whether it's paid experts or members of your network willing to help you navigate your situation and offer additional strategies that can help your business succeed.
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