Many business owners wait too long before facing the brutal facts that their business is in trouble. Then they discover—like a bug in a flushed toilet—it’s nearly impossible to escape the downward spiral.
We begin our business filled with hope and optimism. Before long, forces start into motion to test our grit. Getting sufficient sales and good employees is harder than expected. We face government regulations, slumping economies, cost increases from vendors, customers who pay slow or not at all, cash flow headaches, burdensome paperwork, tax pressures, unproductive workers, stiff competition, obsolete inventory, and constant customer demand for new and better products. (It wears me about just thinking about it.)
We begin our business filled with hope and optimism. Before long, forces start into motion to test our grit. Getting sufficient sales and good employees is harder than expected. Bookkeeping and paperwork are burdensome. We face government regulations, slumping economies, cost increases from vendors, customers who pay slow or not at all, cash flow headaches, growing tax bites, unproductive workers, stiff competition, obsolete inventory, and constant customer demand for new and better products. (It wears me about just thinking about it.)
However, this is the profession we chose; the above challenges come with the territory. So, we suck it up, we adapt, we improve, and we work diligently to overcome the unrelenting forces trying to put us out of business.
Furthermore, not all problems we encounter are equal. Some have the power to kill our business if we fail to remedy those threats without delay. Our survival depends upon it!
Below are ten business killers that, if not addressed, can bring about the big flush and send your business spinning out of control and down the proverbial drain.
Killer #1 Low Market Demand – Your business and revenue model break down quickly when people aren’t very interested in buying your products or services. Perhaps your offering doesn’t solve problems or reduce pain as well as expected. Maybe it is getting old or outdated—running out of steam. Your message could be unappealing and doesn’t attract interest. Customers may be staying away because you don’t have a great reputation for delivering on your promise. Whatever it is, without sufficient product demand, you really don’t have a business.
I remember when Blockbuster Video closed their last store—demand for rented movies moved to Netflix and digital delivery. Question: What is causing the lack of demand for your product or service, and can you fix it?
Killer #2 Hard to Reach Target Market – Are you having difficulty finding an easy and cost-effective way to get your message in front of your ideal customers? Maybe they don’t have obvious hangouts for you to find them, or there isn’t an effortless way for them to find you. Do you have a bad physical location? Are you not easily found on the Internet? Could too much competitive noise be drowning out your message? Is your reach to prospective customers about as effective as a billboard in the desert?
Business philosopher Jim Rohn teaches how to be a master communicator: “First, have something good to say. Second, say it well. And third, say it often.” I repeat: Do you have a clear and cost-effective channel to deliver your message often to large numbers of people in your target market? If not, can you fix it?
Killer #3 Superior Competition – Your potential customers are always looking for the best deal, not necessarily the lowest price. If your competitors are bigger, better located, have superior products or services, provide better customer care, shorter lead-times, more knowledgeable sales people, and so forth, you will lose business. It’s hard to get customers to beat down the door if you are second best, unless you do it like Avis Car Rental.
“The phrase ‘We Try Harder’ has gone down in advertising history as one of the longest-lasting and respected taglines (50 years). The origination of the slogan was not to create a cute, gimmick, but instead it was a business philosophy that every Avis employee adhered to. ‘We Try Harder’ helped Avis earn a reputation as one of the most admired businesses in the world.”
You don’t have to be the biggest, but you must strive to make your business so good that people would be crazy to buy from anyone else. What can you do to inspire this kind of loyalty?
Killer #4 Undifferentiated Strategy – In this day and age, you have to stand out like “purple cow in a field of brown cows” (Seth Godin). You must constantly promote your unique selling proposition (USP)—your main selling advantage. Perhaps you can be better, faster or cheaper than your competition, or you can provide “killer customer care.”
What makes some of the big boys stand out: UPS (logistics), COSTCO (value), Amazon (convenience/ease), Coldstone Ice Cream (quality) or Wal-Mart (low price). What compels YOU to buy from specific stores in your area? Follow the successful strategies of others.
You must have some way of doing business that makes the customer remember their experience, feel that WOW thing, and tell their friends. If you are like everybody else, then it is only luck that that determines your sales. What makes your business strategy —your game plan— a winner? Can you adjust your strategy to dominate a niche market?
Cash Flow and Profit Killers
Killer #5 Not Managing by the Numbers – If you aren’t sure how well your company is performing or why you are losing money, you have a serious problem. It is critical that you understand your leading and lagging indicators, the numbers that tell you where to focus your business improvement efforts. Maybe you are in denial about what the numbers reveal. Remember, the longer you wait to address the problem, the worse things get and the harder it is to recover. If necessary, find someone to help you understand what the numbers on your financial statements are trying to tell you.
In 1891, a British scientist named William Thompson, also known as Lord Kelvin, said, “When you can measure what you are speaking about, and express it in numbers, you know something about it. But when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind.”
Are you aware of the numerical clues that expose the problem areas of your business operation? When you find the under-performing systems or processes that are causing those numbers, can you fix them?
Killer #6 Inadequate Margins – There are very few problems in an established business that can’t be solved with good margins—gross margin, operating margin, and net profit margin. Avoid the temptation to be the lowest price in town unless you have a legitimate cost advantage or operate on a very high-volume business model. Instead, focus on giving your customers the best overall value and buying experience.
To improve margins, you have to raise your prices, reduce the cost of your products and services, and/or lower your overhead expenses. Which solution is best for you to increase operating margins? Without adequate margins, you’re just working hard for the fun of it.
Killer #7 Insufficient Working Capital – If not remedied, cash flow cancer is a deadly disease that will eventually kill any business. You have to have enough money to buy goods, cover payroll, and meet your monthly financial obligations. Borrowing money to do this is a bad idea if you have not resolved the underlying business killers discussed above. However, borrowing can be OK to support growth when you have good profit margins. As you dig out of a cash hole, consider the tips in this article, “A Business System When the Wolf is At the Door.”
Caution: Beware of excessive inventory and accounts receivable that suck cash and make you feel poor even when you are earning a nice profit. Do you know where all your profit has gone? What can you do to move more of it into working capital? If you have little or no profit, you better focus on lack of sales and/or insufficient margins—PRONTO!
Business Operations Killers
Killer #8 Lack of Innovation – If you are not coming up with new ideas for improved products, services, and business processes, you will be left behind. Your company will become stale, undifferentiated in your target market, and ho-hum boring. Competitors that are innovating will surge ahead. Innovation is essential to stay on top.
Business expert, Peter Drucker teaches, “A business has two purposes: marketing and innovation.”
What new things could you do to draw more attention, serve customers better, and create higher quality and more efficient business operations? You have endless opportunities. Make innovation a part of your daily routine.
Killer #9 Weak Business Systems – Without good business systems and processes, you have a disorganized, seat-of-the pants operation that is frequently in crisis mode (every crisis is a system breakdown). Putting out fires is your daily routine. There is never-ending frustration for customers and employees. It’s time to end the madness. What grade would you give your business systems?
Good systems will increase sales, customer loyalty, advantage over competitors, and profit margins. They are essential to a smooth-running and prosperous enterprise. Every business turnaround I have been involved with required drilling down into the operations to find ineffective systems and processes with excessive mistakes, inefficiency and waste.
In a mature company with adequate product demand, reducing waste is the key to rescuing the business. What core systems in your organization drive its economic engine? What improvements could you quickly make? Where might you turn for help?
Killer #10 Uninformed or Ineffective Management – Poor management can drag your business down in a hurry. You have to “get the right people on the bus and the wrong people off the bus” (Jim Collins, “Good to Great”).
You need people who are Systems Thinkers (a learned skill), results-oriented, and who can help you create a culture of excellence.
Furthermore, managers must be in-the-know about the challenges your company is facing. Tap into their unique talents and insights. And remember: good managers get the best possible results with the least amount of resources.
Finally, a frequent cause for business failure is that owners and managers do not create business systems and processes to effectively carry out the mission, strategy and goals of their organization. Do you currently have top-notch people? Are YOU an effective leader?
Turning Your Business Around
When an established business enters hard times, it has a lot more staying-power than might be expected. I have seen companies struggle for years before going out of business or turning themselves around. They are able to live off of the good-will they have earned with vendors, customers and employees. They find needed cash from shrinking inventories and accounts receivable. They get support and softened terms from banks and vendors.
Struggling business owners who exhibit high integrity, courage to face the truth about their challenges, and who forge ahead with pig-headed determination, are often able to swim upstream to safety. And everyone will be cheering them on!
However, you can’t just hope for a better day. You must have a game-plan to solve the killer problems we’ve talked about. You have to get real, and get going—AND THE FASTER THE BETTER!
In my experience, most attention should be focused on either of two things, getting more high-margin sales or eliminating inefficiency and waste. Simply put, you have to focus on the right things, drill down into the details of your business systems and processes, identify the weak links, bottlenecks, obstacles and problems, and fix them.
Hiring the right turnaround consultant might be helpful, but it is usually expensive and not always the best solution. Paying out more money that you cannot afford also adds to your burden and risk.
You know your business better than anyone else. Maybe YOU can do it! Becoming a Systems Thinker and following correct principles is the key to success. If you do it yourself—with your team— you will be forever stronger from the experience. You will become the master of your own fate.
Dr. Terry Jackson is Executive Advisor, Thought Leader, Solutions Provider, Organizational Acceleration Consultant and Change Management Architect. Dr. Jackson partners with Executives and Organizations to align Strategy, People and Processes to optimize and sustain Peak Business Performance. His methodologies increase Profit and Productivity, help manage change and reduce organizational cost.