“Failure is simply the opportunity to begin again, this time more intelligently.”- (Henry Ford, founder of Ford Motor Company)
Data from StatsSA has shown that more than 1,500 businesses closed their doors for good in South Africa last year. This can come as no surprise to anyone who conducts business in South Africa at the moment, with spiralling costs, high interest rates and other tough market conditions that include frequent load shedding at short notice.
It is therefore highly likely that all business leaders will go through tough times and for those with start-ups they can often seem insurmountable. If your start-up is one of those failing businesses the first thing you need to do is determine if the company is worth the extra energy, investment and effort required to save it, and if the answer is yes, then take our steps below to ensure that happens.
Save or close?
The first step to deciding whether to save a company is to work out the root cause of the troubles. Often this will take a team of outsiders, but a conversation with us as your accountants should be the first step. We can help you quickly assess whether your troubles come from external issues such as competition, market conditions or new regulations, or whether they are from internal issues such as poor management, a high level of debt, bad hires or inadequate equipment.
Next you need to be brutally honest with yourself. What was it that made you enter the market? What made you unique? Are these things still true? Is your product obsolete? And is your business still capable of turning a profit? Assuming you believe profit is still achievable, then the next step is a full evaluation of the finances, from assets to debits and invoices outstanding, so you can find out just how bad things are.
From there, we can help you work out the costs of necessary adjustments. Do you need restructuring? New equipment? Or new staff? What will it cost to fix, and do you have the ability to go through the necessary changes? You will need to carefully consider all these steps. You have invested a lot of effort and emotion into this company, and making these decisions rationally can therefore be hard. Having brought advisors onboard, you now need to actually listen to what they have to say.
If you have completed all the steps before this and still want to go on, then ask yourself one final question. Are there alternatives? Is there anyone who would buy the company? A competitor who might consider a merger? And why would one of these options not be better than you keeping things going? It is important to consider all of these options, so that when you commit you know you are on the right path. If, after all of this, you are still determined to save the business, here is what you need to do:
- Rank your challenges
Being in a start-up can be overwhelming. It’s likely you have more than one challenge that’s driving your company into distress, and you may not know where to begin. Your first step should be ranking your challenges. Which of your challenges are the most dire? Is debt getting on top of you each month? Is someone stealing from your inventory and causing you a loss? By ranking your difficulties, you can see which are the most urgent fixes and can tackle them in order, knowing that each tick on the list is a step closer to saving the company. Fixing everything, starts with fixing one thing. - Consolidate debts
Debt consolidation or restructuring can help your company save a great deal simply by lowering the interest payable each month. By consolidating debts into one loan or restructuring loans with different interest terms you can both pay them off quicker and save on the monthly expenses. - Find the funding
Whether your challenge is a lack of advertising, a glut of debt or broken equipment, the answer is often funding. Whether you need to sell a percentage of the business, withdraw money from your own savings, take a loan or beg for money from friends and family, addressing the lack of funding and attending to these challenges is a necessary step. We can help you determine the best way to use the funds you have to make the biggest impact. - Re-evaluate your business plan
Take a look at your business blueprint and particularly your projections for the future. Now, contrast it with the present state of affairs. Which projections did you get right, and which failed? Why? Has there been less demand than expected? Did your marketing team maybe direct their efforts at the wrong audience? What has your customer retention been like? Which expansion opportunities did you miss, and where did you stray from the original plan? Regardless of the root cause, it’s now time to sit down with the experts and brainstorm a solution or a substitute that can fix these issues. - Maximise your staffing
It’s an old and much-repeated adage for a reason, “A company’s best asset is its staff”. Take a look at your staffing and truly analyse whether the people involved are the right fit for their roles. Do they all have the training necessary to do their jobs to the best of their ability, and are they motivated to do so?Depending on the size of your staff it may help to meet with each employee, to ask them what they need and what they think is missing. Often employees may offer insights that can be missed at the top level. Making sure everyone is given the skills they need, feels valued and understands their role will be essential if you want to save your company.Just as important is making sure that those who are hired by your business are all offering value. If your company is struggling, then it is not the time to keep someone on who cannot perform or be retrained to fill a more beneficial role. Many roles these days can be outsourced to freelancers where you only pay for the work that is done. Carefully consider which roles may benefit from this.
- Overhaul your sales techniques
Many business leaders have underestimated the extent to which the sales process has changed over the past few years. There are a lot of new ways of engaging with customers and making new connections, and these should all be actively utilised if you want to be successful.From social media to remote selling and data-driven sales, there are new ways to get the most from your sales professionals. Customer Relationship Management (CRM) systems allow your staff to track and analyse customer behaviour, better targeting the client’s needs. If your competition is making the most of these sorts of strategies and you are not, then it’s time to rethink the way you close the deal.
Don’t give up
Turning around a business can be emotionally draining and thankless work. Now that you have done the evaluation and committed to fixing things, this is not the time to give up. Each time you tick off one of your list of challenges is a step closer to success, and as Steve Jobs always said, “I’m convinced that about half of what separates successful entrepreneurs from the non-successful ones is pure perseverance.”
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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