How To Turn Around a Failing Business

How To Turn Around a Failing Business


– Am I in frame? – [Josh] That’s exactly
what I need you to do. (upbeat music) How to turn
around your business. This is a very serious video. If every month you’re looking at
the numbers and it’s going slim, alright, if you’re feeling
embarrassed because you don’t feel like you’ve made some great
decisions or your arguing or frustrated or you have loved
ones that care about you and have been telling you this. If you know in your heart
that it’s that if you don’t do something today that you might
sacrifice the whole business, and a lot of guys may even
have personal lines of credit or personal guarantees
in your business. I want to teach you guys a
very simple here’s what I do, you know? To turn businesses
around to the point where they’re profitable again. They’re actually generating cash
and you know what you’re getting paid a great salary. I mean that that’s one
of the first things he goes. I’m not gonna take a salary. That’s not gonna
solve the problem. I’m gonna walk you through
exactly how to do it so that you have the financial optics to
understand how your decisions impact revenue, impact
expenses and profitability. Alright, that’s what I’m
gonna share today because, you know, a few months does work
with one of my clients and they had great growth.
This is the challenge is. Most entrepreneurs are
growing really well, right? They were doing a little under a
million revenue but they’re up from 300,000 the year before
so when they’re looking at it they’re thinking we’ve doubled
or tripled the business in the last year but they didn’t
look at their profitability. They didn’t look at the
expense structure to say, “Where’s the profit?” Do we have the cash to actually
scale the business and are we charging what we need to
actually grow and continue this rate of growth. Right? That is the challenge of most
businesses run into or they make a decision and they go off in an
open up a new location or a new division in their business and
they don’t ask themselves what’s the capital requirement,
the cash, that we need to do is? What’s my timeline and horizon? What’s my marketing program to
make sure that I get those new clients to support that new
business and it’s always this game and then
once it’s out there how you shut it down, right? So the first thing
I’m gonna encourage you to do is get the numbers. Here’s how it works. You call the accountant, okay? Most of you guys probably
don’t have great accountants. Here’s what I want you to know. Accountants don’t give a crap
if you fail as a business owner. They don’t. And it’s not
because they’re bad people. Their job is not
to run your business. Their job is not to
understand your decisions. Their job is to take the numbers
you give them and post it based on GAAP accounting practices and
to give you back the reports and for you to understand
the financial literacy to make the decision. So you might be upset with your
account and say well I have the dumbest accountant in the world. Why didn’t they tell
me things were this bad? Trust me, it’s not their fault. It’s yours. You should’ve built financial
literacy into your understanding of running a business. But the number one thing
you need to do to start the turnaround is get
all the information. Get all your
credit card transaction. Get all your lines
of credit transaction. Get your bank accounts. Get everything. Get the expenses. Get all the numbers. Your P&L, your income statement,
your cash flow statement whatever you get
from the accountant. How much tax do you owe? How much payroll stuff? Like all your
exposure, your liabilities. Get all the information, the
real numbers not what you think it is because a lot of
entrepreneurs when they’re watching this video they’re like
that’s where I’m at right now. It is you’re probably worse than
you think ’cause you probably don’t want to look at it. You need to get all the numbers. Number two, is
create a financial model. A simple, I’m gonna give you
the simple financial model is essentially a
cash flow projection. It’s saying what’s my income,
what’s my expenses, what’s my profit and
then what’s my liabilities? Understand how
your business operates. How much money does it make? What’s the profitabilty level? Most businesses because they
have so many decisions they’ve made they don’t
have this in one spot. It’s a spreadsheet each
month it’s projections, right? Wherever you’re at now this
month just get the information and then start a new
spreadsheet and put it there. Look at the customers, look at
the previous year’s revenue to get some estimations
but don’t make it up. Make sure that it’s real numbers
because I don’t want you end up back in his position. Right? The worst thing you could do
right now is put the time and energy in and make
half-ass decisions. That’s not gonna support you. I really want to help
you turn things around so you get all the numbers. You have those
uncomfortable meetings, you talk to your accountant. You give them a sense of urgency
and say look I know you haven’t finished the books and we’re
only halfway or we’re at the end of the year, I need the numbers. I’m gonna come to your office
with my shoe box of receipts and we’re gonna get this worked out
but you gotta get the numbers. Creating that financial model
is gonna allow you to understand how bad it is. You know, and unfortunately
every time I’ve been asked to come in and turn around a
business it’s always worse than the entrepreneur thought. They’re always losing money,
this new division is sucking the profit from this business. This new software initiative,
I get that one all the time. I’ve got a service business, I
want to start a software company and I’m funding it and I never
occurred to me that even though this is highly profitable
that new business or division or department is sucking the
profit out of the business. So we need to get
real on where we’re at. Then you do number three which
is the toughest one and I always encourage entrepreneurs just get ready for the
worst case scenario. You’re not gonna
lose sleep anyway. You might as well just get ready
for the worst case scenario and that means cutting deep. When you do
layoffs in your business you can’t do
surface level things. You can’t do surface
level expense cutting. You need to go deep. You need to cut through the fat
and hit the bone like it needs to cut all the fat off
the business and say what only absolutely need to
run our business. Okay? If you’re not profitable,
it’s only a matter of time. If you look at a cash position
in your bank account and you go okay we have a few thousand
bucks but all that’s accounted for, you’re weeks
away from insolvency. If your line of
credit’s maxed out, if your credit cards
maxed out, all these things. If you only get a
small percentage of available potential borrowing
avail, like that’s just bad. Your business shouldn’t be like
that so you’re gonna have to cut the expenses. You’re gonna have to cut deep. I always say cut
past just the fat, get into the bone
you want to hit the bone. You’re gonna have those
uncomfortable conversations. Look the reality is if
you got to lay somebody off, you’re not obligated to pay
them past that point you have a business to save, right? And I know that you want to do
what you can and do right and these are family and these
are people you care about and I totally get that but the truth
is if you’re at this position, the decision’s made for you. Right, if you just logically
look at the numbers and say you know every month I’m losing
thousands of dollars in revenue then you’re giving that up. You’re causing potential for
your family to lose their home. Especially if you
have personal guarantees. That’s the part that hurts me
the most is when I see these businesses and they don’t
realize like that credit card’s personally guaranteed. That bank loan,
that line of credit, that’s a personal guarantees. If the business falters it’s not
the vendors that you money to it’s the fact that the bank’s
gonna come for everything else. You’re putting your family and
your children’s lifestyle at risk and that to me
should be enough for you to make those tough decisions. Look, if you feel about laying
people off just think of this way go and serve them by
trying to find their dream job. That’s what I always do
if I got to lay somebody off, you know, I’m
gonna make the decision. I’m gonna follow the law,
I’m gonna give their termination notice and then three days later
I’m gonna sit down and do the work to find them a dream job. That’s, if that’s hurting you
for making this big decision, that’s the way
you can approach it. If you have a new division or
business and you’re just you’re feeling embarrassed of cutting
it off or shutting it down, it just is what it is. Look at the end of the day when
you turn this around and I know you will if you follow
this process nobody will remember the failures. They only remember the success. You could be, you know, you
could have to lay off more than half your team and turn the
business around and people will only remember that part. And I know it’s tough to see
today but that’s what you do. Number three is
go deep get the cuts. Four is focus on your customers. If you have customers still
around you need to get on the phone with them and just ask
them how can I create more value for you in the work we’re doing? You need to make sure that
the current customers are happy because if you’ve
been in that spot, you’ve been
probably putting out fires. You haven’t given everybody
the right attention and they might feel neglected. So you want to get on the
phone, schedule the calls, make sure they’re happy ’cause
the last thing you want at this point is to have
somebody not paying an invoice. Or have somebody fire you or
have a bad customer experience moment within
your service business, your product company,
whatever it is. Make sure the
customers are happy. That’s number five. I think that that is the best
way and if you give you’re a great entrepreneur you probably
have customers that want to tell you how much
they appreciate you. They don’t need to know about
the restructuring but you need to make sure that they’re happy. Then it’s all about sitting down
and saying what are the lessons learned because at the
end of the day these are tough decisions and if you don’t
sit down and reflect and do a postmortem then your you’re
very likely to make them again. What caused you to
get in this position? Likely it’s taking
your eye off the financials. It’s not looking at
your cost structure. Thinking you’re doing
great top line revenue but you’re not being profitable. It’s not hiring
the right people. It’s not having the
right advisors in position to help advise you. Maybe it’s not having the
accountant but I’m not blame the accountant because at the
end of the day you hired them so how did you end up deciding
that that was the right person? How do you change that decision
and approach so that you don’t get another person
just like them, right? So having great advisors
be able to guide you is key. The last step
for me, number six, is to build it back up. Right, once you get your
top line revenues in check, you reduce your
expenses and cut deep, you get the business righted you
start paying off those debts. You put a plan together and you
start being profitable again, giving yourself a fair market
salary for the work you do then you need to start
really thinkin’ about how do I build this up? Not doing something crazy,
not investing another business, not opening another division in
my company but doing more of the things that I know
how to do that works. Is it repricing things? It is insuring that you have
the right margin structure. It’s going after the market and
doing marketing or whatever it is but building it back
up is the next steps to turn the business around. So the truth is is
business is all about expansion and contraction. It’s never a linear growth. It’s always step functions of
growth and if you find yourself in a spot where you’re
literally month-to-month, you have no
cash in the business. You’ve been challenged. You’re frustrated
you’re not sleeping. You know you need to
make those tough decision, this video is to give
you the encouragement, the steps, the process
to get the numbers, right? Step one, get
everything all the information. Build the financial model and
the projections to know what is this really look like
going forward if I don’t make decisions and if I do how
does that change my projections. Cutting deep,
getting rid of the fat, hitting the bone, that’s key. Focusing on the customers that
you do have left over and make sure that they’re super happy
then figuring out what are the lessons learned out of this
whole process so they don’t end up back here in
another three years? And then finally, focus on
building it back up so that you can be proud of yourself and
rebuild the confidence that you may have taken a hit
on as an entrepreneur. So I hope this video find you
incredibly well even though it sounds like you’re probably
having a challenging time, I want to give you
that framework to help you get through it. But step one’s schedule
the meeting get the numbers, get the financial projection
and just look at what it is for really what it is and
take the emotion out of it. I want to challenge you to
live a bigger life and a bigger business and I’ll
see you next Monday. If you like this video be sure
to subscribe to my channel and I’d also encourage you to
join my newsletter where I share invites to exclusive events and
other free training videos and if you’re ready to get going I
have a couple queued up for you. See you next week.

You May Also Like

About the Author: Oren Garnes

22 Comments

  1. Don’t be afraid to admit your business is failing. Own it. Reach out. Fix it. You don’t have to go at it alone. Here’s how I help entrepreneurs turn things around.

  2. Two questions Dan,

    They may seem a bit irrelevant to this video but could play a role in helping a failing business or bring a new business into a new market.

    1) Do you think, the one that markets the best for easy adaptation for a technology wins the market share?

    2) How important do you think it is in getting the market share vs the technology if people are not ready to actualize the technology as its so new.

  3. After watching this video, I knew it was confirmation. I had to let go of one of my partners this week due to my failure to make new sales. Most discouraging thing I've done in a while.

  4. Thanks Dan, as always these videos help a lot. It's been a tough couple months. Is there another space I could reach out to you?

  5. BBB put me in a bad way, sales fell enough to make me fight bankruptcy after 13 years, all because I got behind on orders from fast growth.
    Then it turned into a real shitshow.

  6. Hi Dan. Great video. I am into education industry in India and I made bad decisions over time and my business is loosing big time. I took the first step you told, finances. Did layoffs. Started focusing on my present students (customers) and am working on my USP, which is high quality teaching. I am sitting right next to the biggest market player which i think is both an opportunity as well as a threat. What can I do to for a faster turnaround and getting ahead of everybody eventually.?

  7. Hi Thanks for your video. a Question, will the Founders need to pay back their investors money in case of business fail or bankruptcy?

  8. Dan, a great video. I would like to emphasize your point of removing the emotion, and would also like to add the need for the leadership team to take responsibility for fixing the problem areas of the business. For example sales; I all too often see leaders who don't fully understand the sales process, struggle to find effective sales staff (and generally get frustrated with them). This then is compounded when looking to develop sales via a third party, reseller/channel etc, where the business tries to outsource the sales activity, without really understanding it themselves. It is really important to know how the sales side works so that staff can be trained and led effectively and for the third parties so that you can hand over (outsource) a proven sales model to the partner and then work with them to follow it and develop it, together.

  9. En globalvoicedirect.com contamos con la última tecnología de telefonía a bajo costo. no hay necesidad de dinero en efectivo, sin la necesidad de garantías personales. Reportamos sus pagos al Buró de crédito.
    Proporcionamos una línea de crédito a largo plazo de $7500 a cada negocio. Fácil aprobación incluso si usted tiene mal crédito.

  10. Thank you for your advice my hisband really need this i can see him stressing out😔😔😔
    But this video will help him a lot.

  11. We went from 150 to 1.5. My problem is not necessarily profitability, but slowing my want to grow down as now, unless I am growing insane month over month, I am not happy. Similarly, I do not pay myself a salary per say, because I invest more in employees that can do functions that need to be performed. Great video though, really hit home.

  12. Phenomenal and strong advice. I listen to this video over and over again, it's really the right path to go. Thank you Dan

  13. Good advice. Even in larger troubled companies, its universal that the numbers are not a priority in the organization. You have to have immediate and accurate accounting. And if you can't model the business; you cant' run it.

Leave a Reply

Your email address will not be published. Required fields are marked *