How to recover from a bad financial year
Hi Yan,
First let me tell you how much your columns inspire me. I look forward to reading them because your advice is practical, and it is helping business people. I am now asking for your help because 2019 has so far been my worst year in business since opening in 2012.
I manage a small boutique mainly clothes and accessories for ladies. I also carry some sandals and pieces by local designers. My business took a downturn this year for a few main reasons. First, it was the roadwork, which blocked the entrance to the plaza for weeks.
My customers had to park some distance away from the store when they did come by, and to add to that, the dust level was terrible. It nastied up people’s cars and even shoes just to get from the parking lot, and I got many complaints. Now, since recently, the traffic is a big problem and to add to that, I have to price some pieces in USD because of the unpredictable changes otherwise I will be losing.
Please give me ideas! I need lots of new ideas to turn things around right now. Aside from the money issues, I honestly enjoy what I do, and I know I am highly skilled when purchasing, for my customers. Thank you!
– Michelle
BUSINESSWISE: I’m sorry you had a tough year, and I do hope 2020 will bring recovery and prosperity. Asking for help is a great starting point, so I am glad you reached out. In my experience, small-business recovery is particularly challenging because business owners wait too long to get help, then they panic and make rash and emotional decisions, which result in chaos. The sad irony is that those rash decisions and chaos actually accelerate the demise of the business and, worst of all, leave the owners legally and financially exposed because they failed to plan for closing down.
I, therefore, need you to condition your mind that the best outcomes in the circumstances will require your calm and effective leadership, focused on empirical data-driven approach rather than emotional approach, with proactive planning for business closure in the unfortunate event it becomes necessary.
Now, off the top my head, I could suggest strategies that worked for other business owners I’ve worked with such as extending opening hours, delivery, an ecommerce focus, customer experience, and targeting. Monthly subscriptions to sample packages (where you prepare a mix of items specially for them based on their preferences) and they can choose to purchase all, some, or none.
Creating a customer database with all past customers, contacting them individually with special offers with short expiration dates for quick action, using flash sales, partnerships with offices, and organisations, more advertising, better measurement, and strategic, targeted social media content, etc.
However, random ideas isn’t an effective approach because we would be executing actions without any alignment to the actual challenges you are facing or without focus on actual sales and profit targets, brand value, etc. Ideas also have to be driven by what products are most profitable, and in demand, what other services you can add, where you can establish a competitive edge, how you can upsell existing customers and increase their stickiness and lifetime value, among others.
Finally, ideas also almost always come at a cost, require additional resources to execute, as well as patience in anticipating results. Impatience or unrealistic return-oninvestment timeframes can really backfire in a transformation.
CONDITIONS FOR BUSINESS RECOVERY
Business recovery will be iterative, and likely not linear even in the best case scenario. In simple terms, you will need to make changes, measure to see what’s working, tweak, and keep implementing until you get the results you have targeted. Notice that I keep mentioning chasing hard targets as this is critical.
Step 1, therefore, is to meet with your accountant and have forthright discourse on the financial health of the company. Discuss and agree triggers for closure, financial metrics where possible, and include that in your planning.
The next step, armed with the financial data from your accountant, is to meet with a business adviser or coach who can help you create a strategy to minimise expenses, simplify processes, increase sales, deepen customer engagement, and digitise the business to compete in 2020 and beyond.
The coach-adviser must have experience in customer experience, sales, marketing, and a strong appreciation of digital technology, at a minimum. The output of these sessions should be financial projections and assumptions, including the costing of new initiatives to drive profitability (validated by recent and relevant data) that you will take back to your accountant for final review and decision on how you will move forward.
One love!