Many times when businesses fail, they go out not with a bang, but a whimper. They die a slow death. Many small business owners feel the overwhelm of shrinking revenues and the enveloping advance of competitors, but still refrain from making any dramatic changes until it is too late to achieve a business turnaround.
Whether you run a small manufacturing company, professional service firm, or a local retail establishment, there are at least 9 business turnaround strategies you can implement to achieve a successful reversal of your business fortunes.
1. Institute regular strategy sessions
The first time you notice your profit margins shrinking and your clients leaving you for your competitors should be a time when you consider reinventing who your company serves, what it does and how it delivers value.
2. Business model innovation
While this may be obvious for manufacturers, even very small local businesses face strategic business risk from large scale movements and trends taking place outside their industry, or among their customers, or within society as a whole. Business model innovation means that you consider changing who you serve, your position in the value chain, your differentiating value proposition, or all three (among other factors).
3. Invest heavily in customer communication
I am always shocked by just how rarely the average small business communicates with its customer base. So many entrepreneurs and CEOs simply assume that the customers “Do not want to hear from us that much”. My retort to that is always, “How do you know?”
One of the most dangerous habits you can pick up as a business owner is that of turning assumptions into facts without investigation or experimentation. I have seen this one habit kill more businesses than any external conditions or competitors.
Your customers hold the most valuable business intelligence money can buy. Aggressively seeking their feedback and opinions should be your first point of attack as soon as you suspect any structural weakness in your business or your business model.
4. Conduct an audit of marketing assets
Many of the supposed weaknesses and expenses of a business just might be marketing assets hidden in plain sight. For example, a list of former customers who have not bought a thing in the last two years could easily be reactivated with a targeted and honest direct mail campaign. Instead, I often see business owners whose attitude to past clients is, “You are dead to me”.
5. Establish a strategic alliance
The ideal strategic alliance partner has a business whose product or services complement your own. One of the fastest and most effective business turnaround strategies is to “force feed” your lead generation system with a series of strategic alliances. Such strategic alliances allow you to gain endorsed referrals to targeted prospects and to gain additional revenues without increasing your overhead or burdening your operational model.
6. Create a new profit center
One of the difficulties many small businesses (particularly local retail or service establishments) face is the inability to scale. For example, an assisted living facility that has only 10 beds is somewhat limited in how it can increase it revenues if all ten beds are filled and it still has financial difficulties. However, there is often expertise that can be packaged into consulting opportunities, or licensed to other establishments.
One of the simplest ways to turn product or service-based expertise into an additional income stream is through the creation of a closely related information-based business or profit center that piggy backs on the intellectual capital locked up in the business. Such profit centers usually have much higher margins and lower operational overhead than your existing business.
7. Innovate your pricing
Changing how you price your product is often a great way to build new momentum in your business. The history of IBM shows that one of the key changes made by Thomas J. Watson when he became general manager of CTR (the struggling company that would later be renamed IBM) was to convert the pricing scheme of their early machines from expensive outright purchases into more affordable long-term leases and maintenance plans.
Simple price innovations such as offering 3 tiers of price packages rather than a “take it or leave it” price, often results in greater sales conversions for many firms.
8. Factoring and asset-based financing
Sometimes, the unavoidable challenge in achieving a business turnaround is in getting better cash flow out of the assets in the business. Factoring is a type of financial transaction in which a business receives a lump sum for selling its accounts receivable to a third party.
Factoring is just one of many asset-based financing strategies that could fuel a positive reversal of fortunes in a troubled small business. Another option is to receive structured working capital by obtaining loans secured by other business assets such as inventory, machinery, and real estate.
9. Develop a unique selling proposition
Many small businesses get by for a long time on their tactical marketing efforts and only begin to appreciate the seriousness of true business differentiation when such marketing efforts begin to lose steam. A unique selling proposition or USP may be the single most powerful weapon for small business marketing success.
Having a clear reason why your marketplace should do business with you instead of your competitors or substitutes instantly makes all your advertising and marketing efforts more effective. It also gives every customer and referral partner a very powerful referral script on your behalf. If your small business is already engaged in a heavy amount of marketing and advertising, developing an effective unique selling proposition may be the most potent weapon you have for turning your business around.
You do not have to implement all 9 business turnaround strategies immediately. Pick one that seems most appropriate for relieving your profitability and performance bottlenecks, and then get to work. Over time, if you test and implement these strategies, you will find your business on the path to explosive long-term profit and revenue growth.