Let us first get the gloomy stay out of the way: out of all small businesses that fail, 82% do so due to issues related to cash flow. Some of the other reasons include:
- Starting with less than enough money
- Not having a strong business plan
- Getting the pricing wrong
- Being overly-optimistic
- Failing to recognize or accept weaknesses
A lot of small business owners are already starting off with shaky knees and doubtful minds – which is why it is no wonder that they often throw in the towel at the first sign of trouble. However, as Tommy Shek discusses in this blog, entrepreneurs need to have the exact opposite reaction.
Even if the odds are stacked against you, there are a few things that you can do to turn things around for your business.
Ways to Save a Struggling Business:
Identifying the Source of the Problem:
Remember that there is no smoke without a fire and, if your business is struggling, Tommy Shek says that you need to identify the root cause behind it. Perhaps the reason is poor performance from key members of your staff, lack of motivation, or a dysfunctional business model. Whatever the cause, it needs to be pinpointed before you can go about remedying things.
Conducting a SWOT Analysis:
A SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis is extremely useful for any business. According to Tommy Shek, it can help assess its current performance, identify what is going wrong (inadequate operational processes, a lack of product-market fit, or an incorrect pricing model, for instance), and learn about the areas that offer room for improvement.
Establishing SMART Business Objectives:
Come up with a list of objectives for your business, while keeping the SMART model in mind. SMART is an acronym for:
Specific: the objectives need to be clear and fully understandable
Measurable: You must be able to clearly determine once the goal has been accomplished
Achievable: The goal should be practical and accomplishable
Relevant: Should be connected to your larger business vision
Time-specific: Must be attached to specific dates and deadlines (for instance: increasing the website traffic by 20% over the next three months)
After outlining your objectives, Tommy Shek suggests developing a plan that incorporates these SMART objectives. While creating the plan, focus on the steps you will need to take to achieve the objectives you just set out, as well as on the amount of time it will take to achieve those goals.
Managing Your Cash Flow:
As we mentioned at the start of the article, 82% of all businesses that fail, do so due to cash-flow issues.
To avoid becoming a part of that statistic, you need to develop a cash flow forecast that will provide insights about the cash inflows and outflows. Use this forecast to anticipate the expenses and revenue in the short, medium, and long terms – this will help you estimate the amount of money that you need in the bank to manage your day-to-day expenses. You can also improve your business cash flow by sending timely invoices and following up with customers who are yet to pay.
To sum up, the only thing more challenging than being a small entrepreneur is being a small entrepreneur whose business is struggling to survive. However, not all is doom and gloom and, using the above pieces of advice by Tommy Shek will help you successfully navigate this trying period.