According to Investopedia, 20% of new businesses fail within the first 2 years of operation, while 45% fail within the first 5 years. Those statistics are undeniably scary, but what if your business isn’t failing, but simply under-performing? What can you do to ensure that your business takes off and starts reaching its true potential? The good news is that there are methods of turning a failing business around. You can take your business from mediocre to full-potential effectively, but you have to be willing to put in the time and effort required.
Turn an Under-Performing Business Around with These 5 Steps
Profitability can be a complex topic to unpack. According to Quick Books, some businesses make profit in their first year, while others take a little longer to get things up and running. Either way, they recommend using bookkeeping software to have a clear idea of where your profits are coming from and which areas of the business are failing. This is a great strategy when trying to determine why the business is under-performing, but what can you do to actively turn things around?
If your business is under-performing and you have time to try a few turn-around options, now is the time to start. That’s why SME Loans have put together 5 top ideas to help turn to turn an under-performing entity into one that’s reaching its goals and turning a decent profit.
Cut back on expenses.
When a business is under-performing, it’s time to take emergency money-saving action. Take the time to scrutinize your expenses. Cut back on non-essential costs and look around for cheaper service providers. This doesn’t have to be long-term, but just until the business is on track and making better profits. Some expenses to take a look at include: stock costs (ask for quotes from alternative suppliers), internet services, telephone and mobile phone services, transport/courier costs, heating and electricity costs, rental costs, packaging and advertising costs, in-office costs such as tea, coffee, sugar, meals.
Meet with key personnel.
Having a frank discussion with your key personnel is vitally important when the business is under-performing. The first discussion may spark a change in attitude, and you may see greater efforts put in to making the business more profitable. If it isn’t a staff related or management issue, you can use a meeting to discuss the poor business performance and brainstorm for ideas on why the business is failing. Your key personnel may have some innovative and industry-related advice and ideas on how to boost business performance and profitability.
Do intensive market research.
To an under-performing business, market research can be invaluable. Market research can help you to better understand your target audience and to find out precisely what it is they are looking for and how you can cater to that. When market research is done correctly, the data can be used to drive the business in the right direction. According to Forbes, market research is “at the crux of every successful business” and that is absolutely true. You can read the article here, which features the 4 vital aspects of market research that most entrepreneurs fail to take advantage of. If your business is not reaching its full potential, market research can tell you why and help you to implement changes to turn that around.
Leave your cash flow alone – consider financing.
You have probably heard this one a multitude of times: one of the top reasons why small businesses fail within the first 1 to 3 years is because of cash flow problems. The reason you have heard it so often is because it is absolutely true. Most entrepreneurs make a little money and then immediately dip into their cash flow in an attempt to buy extra stock, take on a new project or drive/force business growth. It might seem like a great idea at the time, but it often backfires when the cash flow isn’t made back quite as quickly as anticipated. What is the solution, you ask? Well, cash flow is a tricky one. The business needs a healthy cash flow for its everyday running. Think about telephone and internet costs, rent, fuel, electricity, heating, and so on. All of these expenses have to be covered by cash flow and if you spend it; you’re going to cripple the business budget. The solution is simple: take out a small, unsecured business loan to boost the business, buy new stock, and start a new project, without strapping the business of its available cash.
As an entrepreneur with an innovative and creative approach to business, you have to be prepared to change with the world and with the times. As time passes, consumer needs change and adapt. You need to keep an eye on the market and how things change. Your business needs to be just as flexible and adaptable. If you are willing to diversify, you will consistently find new and growing streams of income. Forbes, again, featured great advice on how a business can diversify to grow with current trends – read it here.
Take Your Business Performance to the Next Level
Taking time out to focus on boosting business performance is absolutely essential to the future profitability of your business. By considering the abovementioned highly-implementable turn-around strategies in place, you can take your business from its current performance status and level it up. Good luck!
Disclaimer: The writing within this article is advice only. SME Loans are not qualified business advisors, so advice is taken at the reader’s own risk should they choose to implement any of the above points to their own business.