According to Gallup, half of new businesses in the U.S. fail within the first five years. But it’s important to remember that they don’t fail overnight. In fact, if you look closely, there are a few key signs that can help you identify a failing business months before it happens. Some of these signs include a halt in growth, poor cash flow management, and a glaring lack of innovation or differentiation.
The first thing most business owners do to try and save their business is cut expenses, but that only slows down the inevitable. What we need to do is breathe new life into a dying business by jump-starting it.
This blog post will help you give your dying business the jolt of energy it needs to get back on the path to success. I’m going to outline a few ways to help turn around a failing business and help you implement them before it’s too late.
Pivot and change direction
Pivoting sounds simpler than it actually is, and could mean many different things to different businesses. For some, it might mean changing your business model, for others, it might mean moving to a completely different vertical or changing your target customer. Maybe you thought your product would sell well with acoustic guitar players, but in fact, it might sell better with piano players.
You might need to sell an entirely different product. This sometimes happens because business owners didn’t properly validate their business ideas or products before launching.
You need to do a close analysis of what’s working and what’s not, and consider making drastic changes.
In the case of Wrigley’s Gum, pivoting was the result of customer demand. Now famously known for selling gum, they sure didn’t start out that way.
Wrigley’s initially started out selling soap. According to their official website, William Wrigley Jr. offered merchants free cans of baking powder for each bar of soap they bought. When merchants were more interested in the baking soda than the soap, he eventually began selling baking soda and instead offered free sticks of gum with each purchase.
Finally, Mr. Wrigley decided selling chewing gum was his most lucrative business after seeing the interest merchants had in chewing gum and in 1892, he began producing gum out of a Chicago factory. The rest is history.
Rebrand
A rebrand isn’t generally the first thing business owners think about when sales start to plummet. But sometimes, when products and business aren’t positioned properly, a rebrand is necessary to solve that problem.
A rebrand that will successfully jump-start your business isn’t going to be as simple as changing your logo. Your entire brand’s approach to how it positions itself in the market will need an overhaul to see a major impact.
An example of this is Old Spice’s rebrand. Before 2003, the men’s deodorant market was pretty docile and the marketing was nothing like it is today. When Axe began to successfully position themselves as the scent that women couldn’t resist, Old Spice, a failing brand at the time, had to reinvent their image.
By 2008, Old Spice, a brand generally seen at that time as deodorant for older men, took it upon themselves to change the packaging of their products. In this case, they changed the packaging and branding of Old Spice Red Zone Glacial Falls and turned it into Old Spice Swagger.
According to Adweek, this change along with their new marketing quadrupled their sales. Same formula, same product, just new packaging and marketing.
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Niche down and focus
When a business owner tries to do too many different things, it can cause the business to stretch itself too thin.
In other cases, a lack of focus could mean the target niche is too broad. When your target customer is “everyone”, it’s really nobody. This is why getting really specific with your target customer is important. Do you really know who your customer is?
If you do, does your business lack focus? Is it trying to do too many things, or be the best at too many things?
In 1996, after operating at a financial loss for years, Steve Jobs returned to a failing Apple. What Steve Jobs saw was that Apple was losing focus and was involved in too many projects. By 1997, Steve reduced Apple’s product line from 350 to just 10, killing off many projects including the promising Newton project, a project that drained $100 million from Apple according to Cult of Mac.
By 1998, Apple was focused on innovating in the personal computer space and the iMac was born, helping the company turn a profit of $309 million that year according to Funding Universe.
Create a new marketing plan
Are you making the most of social media? Is your website optimized and appearing in searches where customers are trying to find you? Perhaps you overestimated the market size or your market research was poorly executed.
A new marketing plan can reinvigorate your business by giving you a blank slate. What you were doing before clearly wasn’t working, so a fresh marketing plan that tries new things just might get your business out of a rut.
After the housing crash of 2008, River Pools and Spas had to reinvent their marketing strategy. According to Hubspot, River Pools and Spas was spending $150,000 on radio ads and direct mail and with the economy being the way it was, that just wasn’t going to work anymore. People who could barely afford their homes now weren’t looking to buy a pool.
The business owner, Marcus Sheridan, turned his business’ marketing strategy around and began to focus on inbound marketing with blogging. Not only did his focus on paid or organic traffic reduce his marketing budget by 70%, he was also able to generate 400% more leads through his business’ blog.
Take more risks
Many business owners believe that during a time of crisis, their best option is to play it safe. This couldn’t be further from the truth. Taking bold risks is often the best course of action to save a dying business.
When you think about it, you have a lot less to lose when your business is nearing its end. You’re much better off trying new and crazy things than being conservative.
Private White, a failing factory that manufactured clothing in the U.K., took a major risk in 2011 when young entrepreneur James Eden took over. Eden made a bold move to have the factory pivot from purely manufacturing to selling its own branded products online.
This was risky for a failing business since they would now have to carry inventory and focus on marketing, in addition to manufacturing their products. Since making the change and selling their own branded products, Private White VC has grown 50% year on year according to Forbes.
Worst case scenario, sell the business
When you can’t turn something around, it might be best to cut your losses and move on. As the saying goes, “when one door closes, another one opens.” A failing business can create opportunities if you can look at the silver linings. One opportunity could be selling the business and giving way to a new business idea. Just because a business fails (or is failing), that doesn’t mean your life as an entrepreneur needs to ends as well. Start a new business. Take the experience with you, and learn from it.
Take action
When you know your business is on its last legs, you need to be proactive. Don’t sit back and wait for things to happen before you take action. Take actions that are not only preventative (before things get any worse) but that also fix glaring problems.
There’s no better feeling for an entrepreneur than when he or she is able to turn something around for the better. Every entrepreneur is faced with challenges and a failing business is just one of many. Even if your business fails, despite all of your efforts, take it as a learning experience. Many entrepreneurs before you have had many failures before their most successful venture. You only need to be right once.