How do I turn my Company from a loss to a profit?

The aim of running a business is to make a profit, otherwise it would be a charity. It happens at least once in every entrepreneur’s lifetime that their business runs at a loss. This means that their business is not profitable and is obviously not a good situation to be in. It is now time for a Business Turnaround.

The question begs “how do I turn this situation around?“.

Now every entrepreneur knows a specific field or industry very well and has specific skills. But not all entrepreneurs have the skills to turn a business around from a loss-making operation to a profitable entity. However, all entrepreneurs can implement an effective turnaround in a few simple steps:

Step 1: Take a step back and shift your focus.

As the owner of the business or the entrepreneur, it is your duty to ensure that the business as a whole is a success. It is your responsibility to sit back, forget about the customers, the employees and the operations for a moment and answer a very important question. “Is my business adding value to the customer?”. If you cannot answer this question positively, then you must find a way to add value to your customers. Let your employees focus on what they do best, serving your customers and you do what you are supposed to do, focus on making the business a success. Look at the critical success factors for your business and make sure you can fulfill them.

Step 2: Identify your most profitable products or services.

Any product or service that you sell and which is not generating you a profit (forget about turnover!) should be cut. You cannot operate your business successfully when it promotes and sells products or services where you are actually paying your client to do business with you. It is however important to determine whether this product or service is a loss leader or not.

Step 3: Cut costs drastically.

No business can operate with an unmanageable high cost basis. The exercise of checking and reducing your company’s expenses should be a 6-monthly exercise at a minimum. While this process is actually a continual process within a business, this step can make a big impact in a struggling business. Pick up your financial statements for last year, look at the expenses listed in there and calculate what 5% or 10% of it is. Now imagine you could have reduced your expenses by that amount. What impact would there be on your net profit? How much extra money would the business have made?

Step 4: Sell unnecessary assets.

I once went into a business where one of their biggest income generating assets was broken down. They needed about R9,000 to fix it, but did not have the cash flow to pay for the repairs nor access to credit to pay for it. This meant that they were losing money on a daily basis because their income generating asset was not operable. As I walked around the factory floor, I noticed a machine standing in a corner. I asked what it was and what they do with it. The reaction I got blew me away. It was a machine they bought about 2 years back, only used it once and haven’t had the need for it since. The best part of this discussion was when they told me that the current market value of it was about R11,000! They sold the machine, fixed their income generating asset and got the business going again. While this might be the one in a million story, every business has assets that are not being utilized at all and can be sold to shit focus onto something important.

Step 5: Market and Sell!

Never stop marketing, networking and giving your ideal client valuable content they really wish to see. It is really unfortunate that so many entrepreneurs stop their marketing and networking when times get tough. This is exactly the time to continue with those actions. Marketing efforts have a correlation to sales. Although both marketing and sales people will argue endlessly as to the effectiveness thereof, you cannot stop your marketing efforts completely. Your ideal customer needs to know that you are still in business and able to serve their needs. Your ideal customer needs to know that you will not drop them in their time of need. Remember, just as your business might reduce during tough economic times, so will your customer’s spending money reduce. Thus, you want to be the business where they spend their available cash.

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