For business owners, a failing company is not something they want to face, but it is a regular, if unfortunate, feature of business life.
According to the Office for National Statistics (ONS), the gap in the number of business births and deaths in the UK is shrinking. In 2017, while the number of births exceeded deaths, the gap in these rates is the smallest it has been since 2012.
The overall death rate for businesses in 2017 stood at 12.2%, but with regional and industry variations.
If a business is dying, is there always a hope of breathing fresh life into it? Can a failing company always be turned around?
Running into Difficulties
There can be a variety of reasons why a business runs into difficulties. Chief among them is cash flow.
However, there can also be certain structural weaknesses which lead to failure.
It might be a lack of proper planning, or no clear value proposition to help differentiate the company to customers. A failure to market themselves effectively can lead to difficulties.
Some businesses are over-reliant on too few customers, which leaves them vulnerable should they lose any, or all, of them.
There might be problems with data security or backup, or, basically, poor management.
The one thing a failing company must do above all others is decide to act, if it is to mitigate the damage and turn around its fortunes.
Halting the Process of Failure
Failure is a process. To turn around any business, the first thing to do is find the means to slow this process down and then make it stop.
Failing businesses haemorrhage cash, so the priority is to stem this flow and prevent any further losses.
This can be challenging, because cuts can appear stark or even brutal, but the end objective is survival and turnaround.
It is a question of looking at what overheads you can cut back on, or what things do not add value to the business. It means getting down to the essentials.
The object is to achieve stability. Then it is about regaining control.
Often when businesses fail it is because management has lost control over how the business has grown or metamorphosised.
At this critical stage of turnaround, it is about getting the necessary breathing space to then make the necessary further changes to bring the failing business back to life.
Concentrating on Core Business
Turnaround means refocusing on the core elements of a business, which may have been obscured or lost.
At the same time, there has to be a concerted effort to get employees and customers to buy into a new strategy.
It means embracing change but also effectively communicating its benefits to others.
A change in strategy is going to be vital in the turnaround process.
Can Any Business be Turned Around?
There is no definitive yes or no answer. It depends on the depth of the issues causing it to fail, but, more importantly, the willingness of the owner, management and staff to embrace necessary change to transform its fortunes.
Turnaround is a tough process, and it requires commitment to stay the course.