So you’ve been in business for a few years. You’ve developed your product or service, marketed it and you know how to keep your customers happy. You’ve grown some – you have probably taken on some staff and perhaps moved into some premises. And you might even have raised or borrowed some money to accelerate your growth. After a few years of solid growth you feel like you’ve got this business thing sussed – it’s not as difficult as people said it would be. It was hard work for a few years but other than a few minor setbacks at the start you’ve pretty much been on an upward path ever since.
And then out of the blue the unexpected happens. Brexit. A pandemic. A key member of staff leaves. A major competitor starts up against you. Regulation means you have to radically change what you’ve been doing. A customer brings a large lawsuit against you. Any number of things might drastically change the direction of your business in a matter of days or weeks and now you’re no longer in growth mode, you’re fighting for survival.
The first time you experience this you experience shock and disbelief. How did this happen? Why did this happen to me? What did I do to deserve this? This goes along with panic about what the consequences are going to be. Will your sales ever return to the levels they were before? How will you replace that key salesperson? Will you even be able to trade under that new regulation? Will that lawsuit clean you out?
And then you start trying to save the business and turn it around – but that’s when the real trouble begins. You see saving a business requires a completely different set of skills from those you have developed to get you to where you are. You have to start focusing on cash not profit – even if focusing on cash produces short term losses. You have to know how to raise funds (whether debt or equity) for a business that is in trouble. You have to make decisive and often difficult decisions regarding redundancies and you have to know your way around employment law so that you don’t end up in a tribunal. You will most likely need legal skills to get yourself out of agreements for services you can no longer afford such as leases on premises or hire purchase contracts for vehicles and equipment. You might have personal guarantees on loans that you can no longer afford to pay which means you may lose your house if you don’t repay them. And you should really have a good understanding of insolvency law so that you don’t commit wrongful trading – knowing how to tread a careful balance between what is entrepreneurial risk taking and what is actually unlawful. And you have to do all the above with a cool head – executing multiple difficult decisions objectively almost as if you don’t care about the outcome. And you need to do it all very quickly – because in a turnaround situation there is little time to waste.
And that’s why many small businesses fail. Not because they didn’t have a good idea – they did and it worked for several years. Not because they got into trouble – nothing lasts forever so trouble is actually inevitable. They fail because they don’t know how to deal with trouble because they’ve never seen trouble before.
So when your time for trouble comes don’t be surprised – it happens to all of us. But whether you get through it or not will depend largely on whether you can transform from running a business to saving a business and not many business owners manage to do that.
