Every hopeful entrepreneur dreams of one day starting his or her own business. However, few like the idea of rebuilding a once thriving business that is now struggling to keep the doors open. Still, this can lead to faster and larger profits than starting from the beginning. Both entrepreneurs looking for a new business opportunity and existing business owners will find this guide helpful with turning around a struggling business.
Is it a good idea ?
The advantage of a struggling business is that they come with what start-ups want the most – existing customers. These businesses also have some decent infrastructure in place, some cash flow, and at least a partial knowledge of the marketplace.
Unless you have experience turning around a business or are confident you know exactly where to start and what to do, you may be better off bringing in a specialist. Someone that has a history of successfully turning businesses around. They typically, take full control of the company by taking the role of the CEO and director of the board.
Often, when you first take over a failing company, the problems turn out to be much more serious than you were led to believe when negotiating to buy it. You can buy a failing business at a low price but the seller is going to stretch the truth to maximize the price. Always, assume the business is in worse shape than you’ve been told.
What you should do
1 – First, look at the people running the business. They might be the problem or they might know what needs to be fixed first. Often, there is a disconnect somewhere between front-end operations and backend sourcing. It could be a quality issue or it could be the wrong materials are coming in the backend or in the wrong quantities.
2 – Next, look at marketing. Did strong marketing once bring in enough customers and now it doesn’t? You need to figure what caused the change. It could be that marketing slowed as the business struggled. Or it could be an old marketing plan is no longer effective.
Also, look at the marketplace that you are marketing to. Has it grown to big or dried up? Have more competitors entered the market? Have market tastes changed?
3 – If nothing is seriously wrong with the marketing plan, the next place to look is at the backend operations. Have prices been spiraling upward in the backend with no price increases in the front-end? Has front-end marketing taken on more than backend operations can deliver? In the backend, you’ll find that expenses have gone unpaid and suppliers have become slow to deliver or have stopped all together and more expensive suppliers have been brought in.
4 – Sometimes the front end has a large volume of outstanding invoices that aren’t being paid. You need to go after these to get cash flowing again. You might be able to factor some of the invoices to bring in a quick infusion of cash.
But always look at the marketplace. You always want to expand the business and it will probably require entering new markets including the international marketplace.
5 – Finally, keep and eye on the people. You may need to let some people go, but the people usually want to turn the business around as much as you do. They built the business and they want to be part of the recovery. It can be very rewarding bringing a company back from the edge of failure.
It can be an overwhelming process and one that requires dedicated expertise. Business debt help is always available, and the experts will be able to guide you in the right direction as to the best steps to take to save your business.