How to turn around a struggling company
Nobody wants their business to fail. The time, effort and money it takes to launch a business alone is reason enough to want it to succeed, but that doesn’t stop half of all businesses from failing within their first five years. Those rates remain the same whether the economy is strong or weak, according to the U.S. Small Business Administration (SBA). So, something else besides external factors must be at work.
Jon Taffer is a serial entrepreneur, business consultant of more than 30 years and host of the TV show Bar Rescue. After helping turn around hundreds of failing businesses, he’s identified a common thread between them. He spoke with Business News Daily to offer his advice on turning around a struggling business quickly and helping it survive for the long haul.
“Every failing business has a failing owner.”
As you’d expect if you’ve watched Bar Rescue, Taffer doesn’t pull punches. He said the No. 1 problem every failing business has is that its owner or management is making poor decisions and yet remains unwilling to change their pattern of thinking.
“Every failing business has a failing owner,” he said. “The owner has to realign their thinking to change the business. You cannot change the [trajectory] of the business without changing the owner.”
Taffer said it’s common to encounter “every excuse in the world” from owners of a failing business. Until an owner accepts that something they are doing is problematic, there is little hope for progress.
“The first thing I do is address the individual running the business,” Taffer said. “Something is wrong with their approach … and I have to understand what it is.”
- Identify excuses: If a leader doesn’t take ownership of the business’s failures, then things can’t change. Eliminating excuses, such as that the cost of business is too high or the economy is poor, is the first step in repairing a struggling business.
- Accept responsibility: Once an owner accepts responsibility for their decisions and the negative impact they are having on the business, they will be open to new solutions and ways of doing things.
- Change perspective: Once an owner’s mind is open to changing old habits, Taffer said, the real work of turning the business around can begin.
Revenue cures everything.
But what does that work look like? Surely, there’s more to turning around a failing business than simply encouraging an owner to look their mistakes in the eye. When a business is struggling, it can be easy to obsess over expenses and try to cut all spending under the sun. However, Taffer suggested that this is the wrong approach.
“Everybody focuses on cost, cost, cost,” he said. “They say the labor cost is too high, the product cost is too high, the rent is high, the marketing is high … but if they raised revenue by 40 percent, they wouldn’t be saying that.”
The next step, then, is to boost revenue rather than cut costs. According to Taffer, “there are no expense problems, just revenue problems.”
“If I try to succeed by cutting dimes rather than building dollars, I’m going to fail,” he said. “I’ve never heard about a business that raised revenue and failed, but there are a lot that cut costs and still fail.”
Taffer maintains a three-pronged marketing approach to growing revenue, each component of which has its own independent strategy and planning associated with it:
- New customer programs: This component is designed to get new customers in the door of the business and spending money. The injection of revenue from new customers will help stop the bleeding and keep the business alive long enough to establish long-term repairs.
- Customer frequency programs: Taffer also works with businesses to establish customer frequency or loyalty programs that incentivize repeat business. If some of the new customers a business has captured can be turned into regular customers, the business will have a fresh source of sustained revenue, he said.
- Spending programs: Finally, the business incorporates new spend enhancement programs, which include things like rebranding and packaging designed to capture more customers as well.
These steps work hand in hand with one another, all with the goal of growing top-line revenue. Rapidly growing revenue does two major things: It helps keep the business afloat and quickly wins over the trust of the owner, Taffer said.
The biggest indicators of success and failure
The idea that success is an attitude permeates the business world, but that seems a bit esoteric at times. According to Taffer, though, success is all about attitude and perspective. If an owner maintains their resistance to changing the way they do things, it’s likely they will ultimately fail. Those who are open to learning and rectifying past mistakes, on the other hand, generally survive.
According to Taffer, most failure is driven by simple outlooks or deep-seated emotions within owners, such as the following:
- Fear: Whether it’s the fear of change, risk or listening to new ideas, many people need to conquer their fears before running a business successfully.
- Ego: Ego often gets in the way of building a successful business because owners create the company for themselves rather than for the customer.
- Scarcity: People often believe that they don’t have the money or resources to succeed in business. However, Taffer said, this flies in the face of the many stories of successful companies started in a garage.
- Time: Often, business owners believe they don’t have the time to sufficiently manage all aspects of the business. According to Taffer, though, lack of time is really a signal that your priorities are misaligned. Making time for the right things is a prerequisite for success.
- Circumstance: Another common excuse Taffer encounters is that circumstances necessitate the current course of actions or prevent success. He says failure to change your own circumstances is a precursor to failure in business.
But the biggest indicator of failure by far, Taffer said, is the resistance of an owner to change.
“If you watch Bar Rescue, most owners resist me from the get-go,” he said, “and that’s shocking to me, because they’re in debt, they’re behind on their taxes, they’ve got no credit … they’re failing in every way, but they’re still resisting. That goes back to excuses and ego.”
Letting go of that resistance and listening to the advice of another, whether it’s a business consultant, other entrepreneur or just the wisdom of an honest friend, is a prerequisite to turning things around.
A friendly economy means the time is ripe for launching a business.
The economy today is strong, creating a supportive environment for small businesses, Taffer said. He cited rising consumer spending, extremely low unemployment and general economic growth across all industries as positive indicators for small businesses.
“Consumer spending is the highest and unemployment is the lowest, maybe even in my lifetime,” Taffer said. “Retail sales are up, even for brick and mortar. Manufacturing jobs are up. It’s boomtown. This is the time to build a business, invest in a business and create value in a business. Any small business that can’t make it in today’s environment is doing something wrong.”
This is even more reason for a business owner to think critically about their own actions if a business is failing, he said. Ultimately, responsibility for the success or failure of a business lies with the owner, and their ability to adapt with the needs of the business lies in their willingness to set ego aside and challenge their own assumptions.
“You have to admit you’re failing before you can succeed,” Taffer said. “Once you own your failure, you can take a whole different approach to solutions.”