Businesses in every corner of the world will experience a major downturn at some point in their existence. This is usually caused by a decline in sales from what is expected, as well as a drastic increase in expenses than what was planned. If not properly handled, these scenarios might be a start of a company’s downward spiral. As such, this scenario will need the immediate attention of the management in order to turn the business around to make profits again.
Oddly enough, even big companies and established corporations have faced these scenarios that almost pushed them to the brink of bankruptcy. Just look at Lego, which almost went out of business as they hemorrhaged cash year-on-year, to garnering its highest revenue in its existence as well as being voted as the Most Powerful Brand in the world last 2015. On the other hand, there were a few very popular companies that failed to overcome adversities and were eventually forced to go out of business, such as Blockbuster and Compaq
Truly, there are effective ways and proven techniques to turn a losing business around. It’s basically a set of structures and well-planned steps that involved methodological approaches that aim to restructure and revive an organization.
Identify your losses
One of the key steps to take when trying to save a losing business is to identify what’s the problem, discover the cause, and pinpoint where it is coming from. It would help you if you tackle this head-on: try to be as transparent with your employees as you can so you can involve them in the solution. Brainstorm with your managers and middle management in order to get a different perspective.
Wherever the problem lies, as long as the whole organization understands its nature, the people in the organization will almost always have an idea that will help solve the issue. Although you know your businesses in great detail, employees will always have an idea how your business runs in the real world.
Stop the bleeding
Cost-cutting in a company is a nasty undertaking, particularly if it involves having to let people go. Unfortunately, this is usually where companies start. Most administrative departments with about 20 employees normally spend as much as 20% of their budgets simply to manage and supervise their own activities, while some departments spend about 20% being loosely managed and spent on too many supplies or redundant equipment, compelling these companies to cut costs.
Find an area of your company where there appear to be bloated overheads, then work your way inwards down to the littlest details. If a sore thumb seems to stand out, then perform a thorough review and determine its real purpose. You may later find that this aspect can be let go and may actually save your business more money.
Put your efforts where the real money is
Another step that can help you minimize your losses and gain profit is by identifying your lucrative business channels and putting more importance and investment in it. For example, if your supermarket only sees a little more than half of your usual customers through your doors, it might make sense to cut down on shelf space for products that only end up getting spoiled and encourage concessionaires to put up shop within your space. Additionally, if your business deals with clients, try to identify which the revenue and cost flow per client. You might be surprised to see that your best-performing clients might already be covering costs for all the others.
Look at your operations
One of the key aspects of any business that lies at its core is its operation, which makes this aspect a very vital part that must not be overlooked. Even if other business aspects such as the brand, its management, or capital issues, flawed operations will definitely mean that there is cash being burned.
For instance, businesses that rely on inventory management might find that the system they’re using has inefficiencies that, when addressed, can significantly improve profits. Additionally, owners must think of expansions with great caution. If your suppliers can’t provide the necessary products or if there’s not enough customer demand, then an expansion might become an operational nightmare down the road.
Focus on people
While it might be hard at first to know exactly what is causing your business to fail, chances are it is people-related. After all, every aspect of your business – from financing to management – involves employees, the management, or even the owners.
On the other hand, while problems might emanate from the people in your business, the solutions will eventually have to come from the right people as well. If your position allows you to make drastic changes, but you think you don’t have the guts to save a failing business, then be a bigger person and promote someone who can. Some companies even hire talent from outside with a proven track-record in turning a business around. When a company requires a major make-over for profitability, trusting the process and getting the right person who knows what they’re doing can be the wisest decision you’ll have to make.