Turning Around a Struggling Business
Running a business is a mixture of highs and lows. If your business is struggling to survive the pressure and responsibility to turn things around causes worry and stress that can become overwhelming. The most important thing to do in these circumstances is to face up to the warning signs and take urgent action to tackle the issues head on. Remember, you are not alone; thousands of business owners are faced with the dilemma of how to fix a struggling business every year. The good news is that help is available. Getting professional support as early as possible makes the recovery of the business more achievable. In this article we’ll look how to turn around a struggling business.
Urgency is Essential
The key priority to turn around a struggling business is recognising the signs and taking urgent action. Here are some important areas to prioritise:
Cashflow Forecasting
Before you do anything else, make sure you take control of your cash. If you don’t already have one you should put a cashflow forecast in place. A spreadsheet is an ideal tool for cashflow forecasting because it can easily be customised to suit your requirements. Weekly forecasting is suitable for most situations although monitoring cash on a daily basis may be more appropriate if cash is very tight. You should forecast at least 3 months into the future so that you always have your next VAT payment in view.
Managing Cashflow
Having built your cashflow forecast you’ll need to allocate time to keep it up-to-date and take action to resolve any cash issues it identifies. You might choose to delegate the updating of the cashflow forecast to another member of your team but it is vital that you keep a close eye on it. If you identify cash shortages in the future you should use the forecast to assess what action to take. Firstly, do everything you can to secure your cash collections on time. Secondly you can move payments dates in the forecast to model different options that improve the cash balance but you must ensure you have agreed this with your suppliers and other creditors (e.g. HMRC, landlord etc).
Identify and correct the root of the problems
It is vital to quickly get to the heart of the issues that are causing your business to struggle. Sometimes the reasons are obvious, but this is not always the case. Often it will be a combination of numerous factors working against you. Finding the most effective solutions is usually more difficult that identifying the issues. The good news is that lots of help is available for struggling businesses and an injection of independent experience will make all the difference to the outcome. Secantor are specialists in turning struggling business around having helped revive many businesses over the years (you can read about one successful example here). Having seen similar situations many times previously we bring the experience necessary to put the right solutions in place quickly. Our independence allows us to bring a fresh perspective without emotional attachment meaning our advice is based purely on what is best for the business. We’ll help you make a plan and stick to it and will walk the journey with you every step of the way, providing much needed reassurance, support and guidance so you don’t feel alone in the storm. Help is also available for businesses that are in difficulty through an insolvency practitioner (IP); a specialist in handling distressed or insolvent businesses. Depending on the circumstances it might be appropriate to involve an IP to understand your options before deciding on the right course of action to take. Secantor can introduce you to an IP if this is required.
Cost Control
Businesses should regularly review their costs as a matter of course, but it is even more important when trying to turn a struggling business around. Examine your costs to identify wastage, asking yourself whether each cost is necessary or could be pared back or even eliminated altogether. Make a financial plan that includes a budget for each area of cost and monitor your monthly spend against one to make sure you stay on track. You should make sure your costs are not disproportionate to the size of your business. This can be a real problem for businesses that are struggling financially because sales and profits can fall faster than costs unless monitored and action taken. If your business is struggling to survive you’ll likely need to be bolder in cutting costs and this will often mean reducing your workforce. Many business owners find this difficult to do so involving an independent expert who is not emotionally attached ensures you go as far as is necessary to protect the business. For a more detailed look at this topic please read our article on cost control.
Profit Improvement
Generating profit will help revive a struggling business by providing a much-needed boost to your cash and build your reserves. There are lots of steps you can take to improve profit. Analyse your profit margins by product, service and customer (you might need to repeat by other factors too such as region, sales person etc). This will reveal where the best margins are made and areas of weaker margins or even losses. Armed with this information you should take action to improve overall margin by focusing efforts in areas of strong margin whilst improving weaker margins and cutting loss-makers. There are numerous ways to improve margin so you need to select the right balance of measures based on your specific situation bearing in mind that the approach may differ from one product or service to another. Consider using an independent expert to help achieve the best result quickly.
Sales
Many struggling businesses suffer from falling sales so reversing this trend will help put you on the road to recovery. But care needs to be taken. Sales with low or no margin will make matters worse. You should therefore ensure you understand your margins before making your sales plan. Target your sales efforts on revenue that will have the most significant impact. Factors that need to be considered when developing the plan include:
The profitability of one product/service versus another
The relative ease and speed at which sales and marketing activity will result in a sales increase
Customer payment history
The costs associated with managing/servicing the customer
The cost and availability/lead time of the raw ingredients that make up your product or service – the quicker they become available the faster you make the sale and collect the cash. If you have large stocks of finished goods this is an excellent place to start.
Once the sales plan has been developed you should set targets, assign individual responsibilities, track progress and hold team members to account for their performance.
How to sell a struggling business
If your business is struggling, a sale is one option you could consider. Any decision to sell some or all of your business in this situation would need to be carefully considered and with professional advice. Again, help is available here. A Corporate Financier is a professional who specialises in arranging the sale and purchase of a business. Secantor is able to introduce you to a business offering Corporate Finance services should you need them. If your business is struggling financially you would need to be realistic about the prospect of finding a serious buyer and willing to accept low offers. You might decide to sell one part of your business, or a business asset to generate cash. Help from an external expert is essential here to make sure you have fully costed each option and considered the impact on the remaining business after the sale. You can find further information about exiting your business here.
Get Help Early
When a business is struggling to survive, getting help as early as possible is essential. Sadly, many owners of struggling businesses leave it too late which greatly limits the options available. Involving a turnaround specialist like Secantor as soon as your business starts to struggle will allow you to take stock of the situation and weigh up the options whilst you still have time to put a plan into action. Secantor’s specialist outsourced Finance Directors will guide you every step of the way and introduce you to more specialist experts as and when required. The good news is that a struggling business can be turned around and go on to achieve great things as demonstrated by one of our former clients who went from losses to a very successful sale. You can read their story here.
If you have concerns about your business, or want to speak to an expert about how to improve your business, book a call with one of our Executives.
