Tuesday, August 6, 2013

5 Tips for Turning Around Your Financially Troubled Business

Chances are that, like most small business people, you are an optimist—pessimists usually work for someone else. Even if your business is melting down in front of your eyes, you hope that sales will pick up next week, next month, or next spring. Sorry, but when economic times are bad and threatening to get worse, the opposite is more likely to be true. Just as in boom times your happiest projections may consistently be surpassed, chances are that when many things are going wrong, more will. You need to create change and make cutbacks fast enough to bring income in line with expenses. Here are some ideas.

Question Your Assumptions 

Every small business rests on a set of fundamental and often simple commercial assumptions such as these:
  • When dogs get sick, owners take them to a vet.
  • When cars are filthy, people wash them.
  • When people are hungry at the beach, they buy food.

This much is obvious. But what can be less obvious is that when a recession hits, the assumptions behind many successful small businesses become invalid or lose much of their power.

     EXAMPLE: Pam operates an upscale children's clothing boutique  in a trendy resort town. Her fundamental business assumption is that grandparents on vacation will pay top dollar for cute outfits to take home as presents for their grandkids. But six months into the recession, Pam realizes that this is no longer true. Because only about half as many older tourists are visiting the town as previously, and many are traumatized by their shrinking retirement plans, the days of free-spending grandparents are plainly over.

      So, with her sales down 50% and her lease expiring, and no reasonable prospect of returning to profitability in the next six months, Pam has a big sale and closes down. She knows she'll eventually open another business, but for now she'll spend more time with her own grandkids.

Concentrate on Your Core Business

Once you honestly face up to the fact that boom times may not return for many years, you need to either close down, sell, or quickly develop and implement a realistic plan to turn your business into a survivor. This often means identifying your business's profitable core and shucking off all or most activities that are not part of it. For instance, a publisher of regional guidebooks with a dozen well-established, profitable titles, and many others that barely break even, might be hit hard when a recession cuts into the area's tourist business. 

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