Business bankruptcies swelled by more than half in the depths of the recent recession, a statistic that masks a world of heartache for the owners of businesses that didn’t make it. Many still struggle to hang on as the fledgling recovery strengthens. Some will survive, while others will be forced to close their doors, absent some last-minute miracle.
When your company faces an uphill battle that seems almost insurmountable, it can be hard to choose between reviving it and closing it for good. But if you follow these steps for small business CPR, you’ll at least know you did everything you could.
1. Find the Problem
Once-thriving businesses can fade away for a variety of reasons. Sometimes competitors take their customers. That’s what happened to U.S. automakers when foreign brands arrived. Other times, markets change but the business doesn’t. That’s what happened to buggy-whip manufacturers when people turned to cars.
It’s not easy to look objectively at your own business’s problems. To start, try going back to the last time sales were strong and profits were good. What changed after that? It may be the arrival of a new competitor, or your own failure to update your product offering. It could be that the customers you serve have themselves fallen on hard times. If you can narrow the reasons to one or a few likely candidates, you’ll be able to focus your revival efforts. For more help with this, try doing the online Quick Biz Assessment provided without charge by the Service Corps of Retired Executives, known as SCORE.
2. Revive Your Marketing
Few companies fail because they try too hard to understand customers and give them what they want and need. Before you take the irreversible step of giving up on your business, go back to your customers and ask them what they want. Ask them how and whether you can supply it. This is a worthwhile exercise for any business, but for the enterprise in trouble, it’s a necessary move before investing any significant effort in an attempted revival.
You may find that your customers are still willing and able to buy your product but you aren’t making it available to them in a way they can do so. For instance, if you advertise exclusively in a local newspaper and your customers are now getting their news mostly online, they’re not seeing your ads. If your advertising channels, pricing, or other aspects of marketing have gone astray, retargeting them can revive your business in a hurry.
One of the least expensive ways of reviving a company’s marketing is through direct e-mail. The cost of sending individual e-mail is negligible. And for the price of renting a new list, you can reach out to new markets. Other approaches that can cost-effectively reach new or existing customers include employing search engine marketing, developing relationships via social media such as Facebook, and using geographically targeted offers with the likes of discount websites such as Groupon. You can pick up valuable insights into how you may be able to market more effectively by using resources such as those available online for free from the Foundation for the Advancement of Marketing Excellence in Entrepreneurs.
3. Rejuvenate Your Offering
Carefully evaluating your customers’ needs may help you find ways you can change your product or service to meet those needs. In the process of studying why your child-care business is struggling, for instance, you may realize that the best thing to do is to raze the building and build a skate park. More often a less drastic modification is in order, such as switching the emphasis from all-day care for very young children to after-care programs for school-age kids.
Understanding why your business isn’t working won’t always provide a way to make it work, however. When you find yourself in that situation, seek expert advice. Talk to other entrepreneurs in the same business who seem to be thriving. Find out what they are doing differently. It may be something as relatively minor as turning a onetime video rental store into a videogame rental store. Or it could be something further afield, such as a used videogame exchange.
It’s also possible that your product hasn’t changed but your customers have. That would be the case if, for example, you operate a classic American diner in a neighborhood that becomes dominated by recent immigrants whose food tastes differ from your menu. When that happens, changing your offering to reflect the needs and desires of your new demographic could not only revive sales but raise them higher than ever.
Customers themselves can stay the same while due to technological or other changes their needs shift dramatically. This occurred recently in the laptop computer market. Once hot sellers, laptops suddenly fell out of the limelight of consumer attention with the introduction of Apple’s iPad tablet computer in 2010, forcing manufacturers, retailers, software developers, and others to reassess their products and strategies.
4. Change Your Business Model
This is the most challenging technique you can try to save your business. It may sound like a simple idea, but to an entrepreneur struggling to pay the rent, changing your business model can be a difficult task. Still, it can be done. Take buggy-whip makers.
A century ago, the whip business was prosperous and reliable because most people got around by horse-drawn conveyance. Within a few decades, people were mostly using cars and had no need for whips. But U.S. buggy-whip makers still survive, and they’ve done so by completely changing their market, product, and pricing, essentially their whole business model. Instead of selling whips for ordinary people to use, they now primarily serve racing markets and affluent hobbyist carriage drivers.
Telephone solicitors represent a more modern example of a business model that was forced to change. Once, calls to consumers’ homes offered an inexpensive way to market a variety of goods and services. But then the wide availability of answering machines allowed consumers to screen calls, rejecting those that appeared to come from telemarketers. New regulations more tightly limited the acceptable hours and purposes for such calls, and the expanding presence of caller ID sealed the deal. Now call centers that once served telephone marketers are devoted to customer service, technical support, and similar functions.
When banks and other conventional lending sources aren’t willing to help you come up with the cash you need to keep going, alternative financial institutions may. Factors, for instance, provide funding in exchange for accounts receivable. Or you may be able to persuade an angel investor that your character and potential are worth investing in, when commercial bankers won’t look at you.
Finally, bankruptcy has proven a last-ditch answer for many businesses struggling with intractable financial issues. Under Chapter 11 bankruptcy protection, you can get your finances back in order and take necessary measures to become profitable again. You can learn more about funding, including alternative financing sources, by checking out SME Toolkit.
6. Slash Costs
Nobody likes to shrink a business, but sometimes it’s necessary. You may be able to cut your costs enough to keep going by closing locations, or even the entire business temporarily. If labor costs are a major portion of your expenses, you may be able to use contract, temporary, or outsourced employees to replace higher-cost, full-time, permanent workers.
7. Recognize Reality
In the real world not every business survives. If you are unable to pay employees, get dropped by critical suppliers, or have an essential line of credit cut off, the decision may be made for you. Sometimes the best you can do is realize that there is no hope and shut down the business while you can still do so in an orderly fashion. Then start exploring your next venture.
Mark Henricks writes about business, technology, personal finance, and other topics from Austin, Texas. His work has appeared in The Wall Street Journal, Entrepreneur magazine, The Washington Post, and other leading publications.