It’s the end of the year and I am not sure I can keep going. Nothing seems to be working. We have good customers, but I can’t seem to get our company to the next level. I feel like we need to upgrade how we do things, but really don’t know how. (I took over the business from my father).
Is it possible to turnaround a struggling company? Absolutely! Most businesses in America—both large and small—face scary times when its products or services are no longer connecting with customers. Cool, money-making initiatives that were highly profitable a few years ago may be money-losers today.
The most obvious fix for struggling companies is the most overlooked. Sure, changes have to be made to the business; but what needs to change first is the mindset of the top decision maker.
Successful turnarounds require leadership focus and a willingness to look critically at a company’s products, services, customers, employees and advisors with both eyes on the future not the past. You can do this!
You also have to be willing to implement some improvements (I don’t like to use the word “change” because it tends to scare people more than the word “improvement”).
What types of improvements can help you become a more effective leader of a prosperous business? Check out four recommendations below:
- Reduce costs. If you want to buy more time to explore new products and service opportunities, you have to right size your company’s operating cost structure…FAST!
Most business owners don’t cut deep enough at the start of a turnaround initiative. The more unprofitable your business operations, the more you should be able to cut. If you can’t find any ways to cut your operating costs, then you are not trying hard enough. Ask a colleague or mentor to help you make these decisions. Reducing losses is the only way to reach profitable operations, which is the point of being in business in the first place.
- Don’t wish for a miracle. Money doesn’t solve all problems. It’s easy for business owners to think that some amount of cash is the solution to their unprofitable business. It’s rarely the case. Sure cash may quiet some bill collectors but any cash infusion from personal savings, credit cards, bank loans or investors has to be allocated to higher purpose initiatives that create even more cash for a company, not just keep the company’s doors open.
Thinking about how much money you need to turnaround a company is about as unproductive as dreaming about winning the lottery. Focus instead on reinventing your company’s products, services and initiatives that will connect with customers in a lucrative way. Once your company’s operating plans match what customers want (not what you want) you are on the path to profitability. Your new plan may also position you to raise expansion capital from investors.
- Acknowledge risk. There is risk associated with implementing any new transformational business strategy. While smaller companies can be more nimble and change direction faster than larger companies, larger companies have more working capital to absorb unexpected problems that are associated with launching new turnaround-related products or services. This means that smaller companies have to be more precise in testing customer “want” and product acceptance and make adjustments quickly.
It’s dangerous to assume the turnaround will work; you have to find ways to know that the turnaround will work. Spend time thinking how you can test and retest your company’s progress in matching customer want with precision.
- Align employees to new priorities. Do your employee’s experience and expertise line up well to your company’s new strategic direction? It’s common for small business owners to make adjustments to their product lines but not make meaningful staff adjustments. It’s a big mistake to compromise in this area.
Paying employees for average or below average work won’t help turnaround your business. As an important asset of your business, you have to seek a higher return on your investment in personnel.
Turning around a struggling business is emotionally hard. The process requires business owners to acknowledge past mistakes, missed opportunities and perhaps one or more times employees, customers, vendors and advisors have taken advantage of their generous nature.
When I worked with struggling business owners I learned that the best way to help them overcome business regrets is to remind the owner that they do have what it takes to invent a successful business once again. Actually, the second time may be easier because they have more experience and wisdom on their side.
For extra encouragement, check out two of my favorite movies that feature sons who inherited businesses from their father: Kinky Boots and It’s a Wonderful Life. The stories both end really, really well. Yours can too.