There are several reasons businesses struggle, from funding to poor management or even poor market demand; the pitfalls involved in running a business are many.
In CBInsights’ Top 20 Reasons Startups Fail, no market need was identified as the commonest reason for startup failures. With the fast-paced technological advancement happening all over the world today, markets are more fragile than ever. A new technology can drastically reduce or completely remove the demand for a product or service.
Poor management, faulty business models, bad staff are some other reasons startups struggle, other times it is just the initial resistance an idea may face at market entry stage. Whichever the case, there are certain principles startup founders and managers can employ in managing a period of business downturn. Let’s take a look at some of them.
Review your funding structure:if your business is heavily reliant on short-term loans, then you have to be very meticulous about how that money is spent.
Downsize:if you haven’t already, reduce your headcount and overhead.
Track your finances daily:install a key indicator system to track your business and have daily, weekly and monthly financial reports issued.
Reduce inventories and overhead:look for items that do not yield income frequently, that’s usually where cash is locked up. It could be the cost of material or labor.
Train and cross-train your staff:when the primary person is out, the secondary person cross-trained to perform the task can leap in and save the day.
Review your advertising strategies:instead of spending hugely on traditional media advertisement, use the new media. This will save you advertisement cost.
Resist unprofitable discounting: this is not the right time to offer promos and discounts; instead compete with service, quality and uniqueness.
Keep cash in Forex:for businesses that earn in foreign currency, this is the best time to keep most of your excess cash in dollars.
Manage effectively:tracking and analyzing key indicators, financial reports and productivity is very valuable to staying in business.
Focus on quality: that is what wins in the long run. Never forsake this principle.
In the world of business today, you have 3 choices to make; get better, get smaller or get kicked out.
It’s your choice.
Author: Wole Oluyemi is a chartered accountant and business advisor, with special interests in SME businesses, strategy, finance and tax. He is also a doctoral researcher at Cranfield University (UK) with research focus on corporate political strategy. He can be reached at @WoleOluyemiCo on Instagram, Twitter and Facebook.