What To Do When Your Business Is Failing
Businesses fail – that’s just a part of life. Sometimes, it comes out of nowhere and, other times, it’s months or years in the making, but it doesn’t make it any easier when your business is failing. It also doesn’t do you any good to ignore or avoid the problem.
Instead, start taking steps to reinvigorate your business as soon as possible. You might be surprised at the results.
Ensure A Positive Variable Contribution
The variable contribution margin describes the amount remaining after the overhead production costs of an incremental unit are subtracted from the costs required to deliver that incremental unit. If your company is currently paying out more than it’s bringing in, it might be difficult to reverse the trend and save your failing business.
It is still possible, but you’ll need to start turning a profit immediately to have any chance of success.
Cut Costs Wherever Possible
Business owners often go to great lengths to reduce their overhead costs, especially in the face of their endeavor failing. Cutting costs is one of the most effective and straightforward methods of saving money. However, it’s important that you don’t cut too much from too many areas – or else your company might not have enough left to survive.
Some common, useful ways you can cut down on your business’ overhead costs include:
- Removing paper-based communications and records in favor of digital documents.
- Eliminating all spending on non-essential items or services, also known as discretionary spending.
- Negotiating costs with vendors, suppliers, service providers and partners.
- Layoffs are never fun. However, payroll is usually a company’s largest expense, so there is are often places to become more efficient and save payroll expenses.
The areas mentioned above are just starting points for your own cost-cutting strategies. Most companies have numerous other areas that are bogged down by unnecessary or overspending which might be responsible for their business failing.
Prioritize What You Pay
If your business expenses do end up surpassing the amount you generate, you’ll have no other choice but to start prioritizing spending. Prioritization is a mainstay in personal finances, yet it’s an area that is sometimes ignored when it comes to corporate finances.
Start with the expenses that will have the largest impact on your daily operations. Typically, this means giving your employees their salaries before paying the bills. Move on to the obligations and responsibilities that carry significant penalties for non-payment, as these delinquencies can really accumulate over the course of time and make it even harder to recover.
Finally, focus on paying any bills that are currently marked as late. If anything is left, use it to cover the bills that aren’t yet past their due dates.
Plan Business Cash Flow
Most professionals develop a cash flow model by highlighting the business’ current total of available cash and contrasting it against the expected receivables. This provides a clear picture that lets you determine exactly what expenses you’ll pay, when you’ll pay them and exactly how much you’ll be giving.
Depending on your needs, a cash flow model can be made on a monthly basis, annually or anything in between. You have to do whatever it takes to get your business back on its feet and turning profits as quickly as possible – or else you might have to close your doors for good.
Communicate With Your Creditors
Whatever you do, don’t ignore your creditors. You aren’t doing your business any favors by shrugging off their calls or failing to respond to their messages. Even if you don’t have the amount you owe, it’s still important to initiate contact and explain the situation.
If necessary, detail your exact strategy for paying them back over the course of time. In most cases, creditors can and will work with you – as long as you’re not trying to give them the runaround.
Conduct SWOT Analysis
SWOT (strengths, weaknesses, opportunities and threats) analysis is a great way to come up with an overview of the entire picture. An essential part of risk management and control in the 21st century, SWOT analysis gives you a multifaceted picture regarding the state of your current business.
Not only does it let you address specific weaknesses and threats, but it gives you a deeper understanding of how your business is doing and how you can improve it in the future.
Establish A Clear Roadmap For The Future
The final step in reviving your business requires you to create a clear roadmap for the future. This should include information on your corporate culture and general mission statement, an overview of the products or services you plan to provide and detailed information on your demographics.
Some of the most detailed road maps are also used to disseminate marketing strategies, address business shortcomings, and capitalize on new and prospective opportunities for growth.
Failure can be a debilitating event, but if you want to save your business, you have to think and act fast. At HJR Global, we understand that this situation is scary and we can help you turn your business around. Contact a member of our team today and let’s work together to save your business.
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