How to Turn Around a Small Business Failure
There are plenty of reasons why small businesses fail even if a lot of time and effort has been invested in nurturing it. The product may not have met customer expectations, the pricing may have been off, you may have run out of funds, or the market environment may have dramatically changed. Whatever the reason, there is no reason why the setback should mean abandoning your dreams of owning a successful enterprise. The failure of the business can be a valuable learning opportunity and you can bounce back with renewed energy. Indeed, it is quite rare for even the most successful entrepreneurs not to have suffered any setbacks at all. Some tips from experienced small business owners on how to handle business failure and turn it around:
Wake Up to Reality
Entrepreneurs are so involved with their business ventures that often they are unable to recognize the signs of failure. Consequently, they end up deploying more cash and effort when actually they should be taking stock and taking corrective actions. This alienation from reality often drives them deeper into a cash crunch and they may end up taking debt that is completely unnecessary. It is a good thing to sometimes step away from the business and assess its health objectively. It is important not to become numb to business failure and keep on digging yourself into a hole. Harsh as it may be, you need to accept the reality so that you can start planning how to reverse your fortunes.
Evaluate the Situation
After realizing that the business has run into problems, you have the option of dumping it or reviving it. As emotional as the decision is, it is not necessary that every business can be revived successfully. Your assessment should be extremely realistic both in terms of how far the business is off-track and what your own capabilities are. If your evaluation, if need be with the help of experts, reveals that the business idea still holds good and the problems are just in the way things have been implemented, you can think of turning it around and realize your ambition of running a successful small business. Keep in mind that the evaluation should be carried out objectively and calmly in consultation with all the stakeholders like distributors, salespersons, employees, suppliers, and even customers.
Identify and Eliminate Inefficiencies
Once you know the broad areas where you had gone wrong, it is time to hunker down and identify all the inefficiencies that cause wastage of precious resources. This will include scrutiny of all the processes involved in manufacturing, sales, finance, staffing, etc. This is very important because as a small business owner you have to make very efficient use of scarce resources. Keep an eagle eye out for tasks that are currently done manually but which, can be easily and inexpensively automated so that your employees can devote themselves to more important jobs.
Cut Out Excess Spending
There are many small businesses that make a very good start and then become uncompetitive and burn cash like crazy without getting the impetus desired. Generally, this happens due to a sense of overconfidence where the entrepreneur fails to keep a strict watch on business expenses, which start spiraling out of control. When a business is small, it can be counterproductive to have a very large number of products on offer because it is likely that all of them will not have the same demand. You should cut back on the number of products and focus on the items with the maximum demand, cut down on the inventory levels, reduce the credit period, stop unnecessary advertising and trim down marketing expenses to the extent possible. When in a difficult phase, it pays to renegotiate terms with key suppliers or even switch vendors. Private lenders like Liberty Lending can be good sources of the funds required to set your business back on rails.
Even with the best of planning, every business will encounter multiple setbacks and overcoming them is part of the entrepreneurial experience. You should have some plans ready to face unexpected events even before you actually face them so it is wise to conduct a proper analysis of the most likely events. Of course, it does not mean that there will be no other setbacks but these you will have to react to on the go as best as you can at that time. Make it a point to have a small corpus of funds available to meet unexpected expenditure and also to the extent possible, take out insurance cover for all tangible assets like office equipment, plant and machinery, vehicles, raw materials, and inventory so that events like fires, floods, etc. do not wipe you out. Even though you can’t control the market or the economy, making accurate projections of the demand will help you to plan better and not be caught off-guard.
Be More Visible to Your Target Audience
Many small businesses fail to take off simply because they are unable to sell their products in the volumes that are necessary for strong and sustained growth and profitability. It is very important to be able to find adequate numbers of customers and this is only possible if you are visible to them. Since print and television advertising is out of the reach of small businesses, you could try to reach out to your target audience online with your website, social media, and email marketing campaigns. These routes are extremely cost-effective and can address a global audience as easily as local customers in the vicinity of your store. Unless you have a sharply differentiated product with unique features, you will require being competitively priced and easily available. In addition to a really good customer buying experience, you need to offer top-quality after-sales service that will have customers coming back repeatedly.
A business failure can be really shocking especially if you are a first-time entrepreneur. However, it is important to understand that successful businesses are not built overnight but are instead, products of relentless effort, adjustments, learning from mistakes, and the ability to never lose hope.