Business is a tough racket. When you succeed, you feel like you are on top of the world. When you fail, it feels like you’ve hit rock bottom. It is estimated that about one-fifth of small businesses shut down in their first year (PDF), and nearly half of smaller enterprises crumble in their fifth year. These numbers do vary worldwide, but one thing is for sure: running a company is not for the faint of heart.
For a lot of entrepreneurs – neophytes and mavens – understanding how to overcome corporate failure in a rational manner is one of the hardest lessons to learn. No entrepreneur sets out to invest in a startup, only to see it shut its doors within a year. But it does not need to be a glass-half-empty scenario. In fact, it can be the opposite by knowing that success can be attained through failure.
We have compiled a list of ways that you can conquer business failure and turn the experience as a stepping-stone towards something greater.
1. Establish a Contingency Plan
A business contingency plan is a necessary component for every entity’s strategy planning because it prepares us for the worst-case scenario. It is comparable to a rainy-day savings account: Sure, you do not want to prepare for a sickness or a job loss, but life happens, and it is better to be ready than blindsided.
This is how contingency planning works; Your organisation has a detailed course of action to implement, should an unforeseen circumstance or unexpected situation unfold before your very eyes. You’re proactive.
Here are some tips when putting together a contingency plan:
- Perform tests to determine if your plan works.
- Refine your contingencies as time progresses to ensure you adapt to changing conditions.
- Partner with a dependable IT firm that can ensure your data is safe and retrievable.
- Implement checks and balances to identify weaknesses.
- Designate someone in your firm to devise a contingency plan – if you have a large business.
- List your credit options, like a business loan, as a just-in-case survival element.
2. Conduct a SWOT Analysis
Every organisation – large and small – should conduct a SWOT analysis. The primary objective of this age-old technique is to understand the ins and outs of your enterprise and what factors are taken into account before action is taken.
Wait a minute. What does SWOT analysis stand for?
- Strengths: Positive internal attributes, physical assets and competitive advantage over rivals.
- Weaknesses: Negative internal factors, such as gaps in your staff or processes that need to be improved.
- Opportunities: External elements that might contribute to your corporate success.
- Threats: Outside forces that you do not have control over, like a global pandemic that shuts down entire economies.
Since you are attempting to overcome business failure, it is imperative to concentrate on the weaknesses and opportunities aspects of your SWOT analysis. These two considerations may likely have been the cause of your entrepreneurial demise.
3. Focus on Your Customers
Without an injection of customers, it will be hard to maintain operations. If you are unable to build leads, accumulate prospects and gain new clients, then it is imperative to concentrate on the customers you do have. It is comparable to an inspirational movie, Jerry Maguire: a sports agent loses all his clients, except one football player, and the agent needs to apply all his resources and energy to this particular athlete.
When you can’t capture a new revenue stream, you must harness the power of your current patrons. Whether this is attempting to expand upon their business with discounts and new products or leveraging their patronage for email marketing tactical purposes, focusing on your most loyal and frequent clients can be one of the smartest business tricks you can utilise.
4. Be SMART
Just how SMART is your company? This analysis can quickly revive your operations by quantifying the aims of your firm, enabling your organisation to possess an articulated objective with all parties. You may be wondering by now what SMART is:
- Specific: Your goal is quite elementary, my dear Watson. It is simple, precise and unambiguous for all stakeholders.
- Measurable: Your objective is easy to measure and assess your progress, allowing you to determine if you are on the right track.
- Attainable: Your aim is realistic and achievable. If it is a pie-in-the-sky dream, you set yourself up for failure.
- Relevant: Your target matters and relates to the entire firm, not just a select few (or none at all).
- Time-bound: When do you wish to achieve your goal? The answer to that question can matter significantly because the timeline can affect your solutions and options. Six weeks or six months – your practices can vary by the calendar.
Do you feel SMART enough yet?
5. Manage Cash Flow During Downturn
During any hiccup, you must count your pennies. Without consistent cash flow, your firm could succumb to the basic laws of finance. If you don’t have money coming in, it will be hard to keep your doors open. Until that dire day, there are several ways to attain a regular injection of cash:
- Send out invoices on time to ensure you are promptly paid.
- Contact clients that are in arrears and that have been bucking you for weeks.
- Accept deposit payments in advance.
- If applicable, use an accounts receivable financing service to add the balance of money to your coffers.
- Refrain from falling behind on your own bills to avoid additional expenses.
Even if some of the invoices seem inconsequential, there is an old saying that says follow the pennies and the dollars will follow!
6. Invest in Social Media
Marketing professionals often say that if you aren’t on social media, then you aren’t trying. It has become a cliché, but it still rings true for many businesses that think social networking is overcrowded and that it is a waste of time and resources. This is a mistaken belief because the better viewpoint is that there are millions of potential customers at your fingertips.
Social media platforms such as Twitter, Facebook, Pinterest and Instagram are all valuable tools that can be utilised when you want to generate new leads, advance your brand strategy and amplify your digital operations. If most consumers are in a certain place, why would you avoid travelling to that destination?
7. Hire a Business Advisor
One of the causes of a failing business is that too many owners are stubborn and refuse to adapt or even take responsibility. We get it. You have put your blood, sweat and tears into your company, and you don’t want to be told that a lot of what you did was wrong.
Whether you are just starting out or you have been an entrepreneur for a few years, hiring a business advisor can be one of the best investment decisions you will ever make. Since a business advisor is a successful entrepreneur with a knack for the corporate world and the marketplace, you can pick their brain about what went wrong, what you can do to move forward and how you can achieve success.
8. Avoid Emotional Decision-Making
Making decisions based on emotions is one of the reasons behind a business failure. It may be easier said than done, especially when you are in a moment of rage or sadness. That said, taking a few moments to collect yourself and become rational again is paramount to ensure you overcome the hurdles and barriers. Go for a walk, grab a coffee or just take a deep breath – this is the entrepreneurial mindset you need to maintain during the bear and bull markets of your business cycle.
9. Surround Yourself with the Right People
It is said that you are the company you keep, suggesting that if you surround yourself with the wrong type of people – morose, procrastinators, ignorant or lazy – then you will adopt their characteristics. There is some truth to that, particularly when you are running a company. Imagine having someone in your office who shrugs about everything and says no to everyone. This toxic behaviour can significantly affect your business’s performance.
Instead, you want to have top talent on your team, and you want your immediate circle to be encouraging, upbeat and equally invested in your company.
10. Experiment Outside Your Comfort Zone
Entrepreneurship is about taking risks. If you are uncomfortable with uncertainty, then you should work for somebody else instead of being self-employed. However, if you can take a sensible business risk by weighing your options, stimulating your little grey cells and testing them out, then why not? Risk is manageable when you are not doing it based on emotion.
Ultimately, to run a successful company, you need to step outside your comfort zone on occasion. In the years to come, you will have accrued a reservoir of experience, knowledge and wisdom that can be tapped into when you need them.
Everybody wants to be perfect at something on their first try. While it would be great to perform Bach’s Goldberg Variations on the first attempt, it takes months and even years of practice to execute a stellar performance of the classical composition. The same reasoning applies to business.
A lot of resources go into owning and operating a company, whether it is a hot dog stand or a consultancy firm. Not everyone will know what to do on day one, from cash flow management to digital marketing, it will take plenty of trial and error for your business to excel.
In the end, do you have the patience and resilience to survive the harsh world of business? Better yet, what have you learned throughout all this agony and anguish? These are the questions to ask yourself at the end of every workday to be sure that you are ready to enter the next stage of business.
Have you ever had to overcome business failure? What are your tips and tricks? Join the discussion in the comments section below!