The recession that we are heading straight for will cause many problems with entrepreneurs who have never had to face such a serious threat before.
If you run into financial distress, you need to learn how to Turn Around Your Business before it is too late.
The problem is likely to be made even worse by the financial crisis which is making banks nervous of lending to each other let alone taking risks with small businesses. Any small business that hits financial trouble, is unlikely to receive a sympathetic ear from their bank.
This makes it essential that you have business rescue skills available to you, either from your own knowledge or from a trusted advisor.
I would like to introduced you to an excellent book, “Turning A Business Around” by turnaround expert Mark Blayney.
Tips For Turning Your Business Around
First pick up on the problem early. The sooner you decide to so something to turnaround your business, the more successful you are likely to be.
Turnarounds take time and they need cash but as a business declines in performance and starts to lose money, cash and time are draining away.
Scan your market environment regularly.
Can you see signs that the recession is starting to hurt?
Are you in a business which accelerates the general economic trends.
People always want food but they don’t need luxuries so supermarkets track the economy while restaurants exaggerate the changes. In good times, people have spare money in their pockets and will go out to eat. But when cash gets tight, visitors to restaurants fall away sharply.
Consider how your rivals will act. Will they try to maintain volumes and cut prices or will they take try to protect their margins?
The more prepared you are for financial distress, the easier it will be to turnaround your business.
Second, take a good hard look at your business. Now is the time to be brutally honest.
Are there any costs that you can cut easily?
Are there any assets that you can sell now while you may get a reasonable price?
Is there any planned expenditure which you can postpone?
Decisions are not easy but a great technique is Brian Tracy’s zero based thinking. Ask yourself “Knowing what I know now, would I still…”
The more you prepare your company for the difficult times ahead, the better your ability to survive and avoid financial distress.
Third, look out to your market and whether there are any opportunities for increasing sales.
Concentrate on discovering ways that you can increase the value of your transactions and the frequency which your customers buy. It won’t be easy but even if you have a strong relationship, they may know all the products and service you provide.
If you can increase your sales from your main customers, it will make it much easier to withstand any pressure on price. The real profit squeeze happens when sales volumes and sales prices both drop sharply.
Fourth, prepare your plan.
Identify the actions you will take and set completion dates.
Prepare a cash flow and keep it up to date. Cash will be the thing that determines whether your business survives.
To help you do all this I recommend Mark Blayney’s book “Turning A Business Around”