4 things to consider when your business is failing
The seemingly inevitable failure of Facebook, the attempted sale of Times Warner, the crumbling of the Weinstein Company and the takeover bid for 20th Century Fox should remind us all of one important fact. Eventually, every business ends. Either it shuts down and closes up shop, is rebranded completely or it’s bought up and sold off. You might think there are companies on the market that this won’t happen to but of course, it will. Nothing, not even the conglomerates like Disney are too big to fail.
It’s true to say that for some businesses, death comes far more quickly than anticipated or indeed expected. A lot of businesses won’t even make it past their first year on the market. Why is this, what goes wrong? These are some of the questions we’re going to look at today. But we’re also going to explore how to catch a business before it hits the ground. There are ways to save a failing business. You just need to have the right mindset and know what steps to take. Let’s get started then by thinking about the basic measure of success.
Does Your Price Exceed The Cost?
This is a very basic, simple lesson of business and you would be amazed how many company owners completely forget it. Before we go on, we should note that sometimes, businesses can find success by selling for less than it takes to make a product. Companies may start off on the market selling at a loss. The benefit of this, of course, is that the low price attracts more customers and helps you build up interest in the business and thus ensure the longevity of your company.
Careful though, because eventually, that has to change. You have to start making more than you’re spending at some point and it should be early on. What happens if you fail to do this? Basically, you’ll be bought out or killed by a competitor who is able to sell at a higher price and maintain profitability.
The general rule here is this. You need to make sure that you’re making enough on the price of one unit of product to make more. If you’re not in this situation, you will need to either increase the price or lower the costs, regardless of the impact on demand.
It’s easy for costs to grow out of control of cost. Maybe, you’re just spending too much on staff. Business owners often assume that spending more for highly trained, the professional expert staff is always going to be the best option. Actually, this isn’t true, because if the staff are more expensive and overskilled, then you can cut cost by using cheaper employees who will still be able to complete the same job. So, look at the staff you have hired and figure out whether they are costing you more than they are worth. If they are, it might be worth exploring cheaper options on the market even if they’re not quite as qualified.
What If You’re Behind With The Bills?
If your business is on the edge of failing, it’s likely that the costs are growing out of control. That’s understandable, but there are ways to deal with this issue. First, you should think about borrowing and rather than borrowing outright you can borrow based on the assets that you have, using them as equity to free up the capital you need. You can see your options here.
online, or you can just think about the most valuable assets in your business right now and whether you actually need them. If you are changing up your business model, it’s always a smart idea to take a look at what you’re not using, how valuable it is and whether you can sell it. Of course, using equity to borrow is always going to be a risk, but if it keeps you afloat, it could be a risk worth taking.
Of course, if you already owe money in your business, you need to start prioritizing the payments. You may not have the cash to pay all the money you owe at once, but that’s okay. Think of it like being in debt. If you’re being in debt, what costs do you focus on? Well, you keep up the mortgage repayments because otherwise, you’ll lose the house. The Phone’s not important so you might let that slide but you need heating and electric, so you keep paying those. The credit card bills? That will depend on how much you owe.
The same is true with business payments. Prioritise the payments that will hurt your company the most. Again, energy bills are going to be a top priority because without the energy, you’ll have no power and with no power, you can’t operate. The website hosting bills are often one that slides through the cracks when you’re facing money trouble, but this is actually important. Without it, your website won’t respond, and if it’s not responding, you can’t get customers. If that’s your only source of income, boy are you in trouble.
Then, consider the penalties that you might face if you don’t pay some of the costs you have hanging over your head. You might think that tax is something you can let slip a little but tax fines can be massive and more than enough to push your company out of business for good. Of course, if the costs are getting bigger and bigger, you need to look at ways to reduce them. There are various options to consider there.
Cutting Back Those Costs
The first step is to remove any of the luxuries, the little things that make your company just a tad more unique. That’s important when you’re trying to entice new workers into the fold but not so much when you’re only just hanging on. So, if you’re running a small business, you might give employees little treats such as doughnut boxes for the office kitchen. These are the little things that will, unfortunately, need to be avoided and ignored. Yes, employees will notice the change, and you may have to explain the situation. But a few white lies wouldn’t go amiss here as there’s no sense creating a panic. You also don’t want them to start abandoning ship while the course can still be corrected.
What about actually laying off some of your staff? This is a personal decision, and it’s one that you’re going to have to make yourself. Some companies will do everything in their power to avoid laying off staff. But even if you can avoid firing someone, something has to give. This usually will mean a reduction in compensation, hours or even total pay. It’s the only way to keep things going and the cogs turning. You will always have difficult decisions to make to keep your company afloat, but it’s better to make them then to just surrender. Don’t forget, if the company fails, everyone loses their jobs anyway.
You may also need to think about asking for help. For instance, you might be renting your office space. If that’s the case, you should consider asking your landlord whether it might be possible to pay less rent until you get things back on your feet. Why would they agree to this? Less rent is far better than an empty building.
It is worth speaking to a financial consultant and finding out what the profitable and non-profitable areas of your business actually are. There might be various areas that are not making any money at all. Cut them out your business model, and you’ll be back on track.
Time To Sell?
If you can’t save the company, then you need to think about selling it. You might think that your business isn’t valuable enough to even think about a sale or to consider that a possibility but don’t be so sure. There will always be valuable parts of your business even if you just ending up selling it like a car that’s been scrapped. For instance, you might have an awesome web domain. Some people will pay thousands for the right domain that they believe could easily become profitable. You will need to talk to a broker about this possibility.
Remember, always keep the future sale in mind. This means regardless of what point you are at running your business, the logbooks and records should be in good order. This will guarantee someone will want to buy your company in the hope of turning it around. Where you may have failed, they will see potential and selling can give you the money you need to start over with a new idea.
We hope you take this advice on board and look at the ways that you can save your own company, catching it when it falls. You have some difficult decisions and a rough road ahead, but if you succeed, it could all be worth it. It’s just a matter of taking the right steps and course correcting your company.
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