If every startup or entrepreneurial venture were a success, then the world would be full even more weird and wonderful businesses than it already is. However, it’s a well-known fact that the chances of a new business failing are higher than those of it succeeding, but that doesn’t keep tens of thousands of people from giving entrepreneurship a go every year. With that being said, it kind of makes sense to know what happens when a business goes bust - and what you can do to save your sinking business in the first place - so that if you ever find yourself in either of these situations, you’ll know what to do so it doesn’t destroy your life and ruin the chances of starting any future businesses.
Let’s start with what happens when a business starts to go bust and then we’ll hit on what you can do to stop the financial bleeding and turn things around.
You Stop Making Money And Start Owing It
A clear difference between entrepreneurs that do well and those that don’t is that a failing businesses isn’t bringing in enough money or turning a profit. Seems pretty obvious, right? Yet if you’re an entrepreneur or taking a swing at launching a new startup company, sometimes the facts can get blurred a bit. There’s a big difference between making sales and having cash come in the door and actually turning a profit - a fact that often gets overlooked by entrepreneurs who start their businesses as passion projects.
They may still make sales and see money enter the business, but this pales in comparison to the money they’re spending or may even owe. In the excitement of following their passion and truly desiring to make a big impact in the world, some entrepreneurs overspend on tech tools, back-end operations and even consultants. Their new business can quickly turn into an expensive hobby or even financial drain instead of being a money-making enterprise. The simple fact is that if your business isn’t making enough cash to pay for all your expenses, you can quickly ramp up some significant debt to various people - which lands you in a pretty sticky situation.
Your Personal Finances Take A Hit
When you first start off (and possibly for the duration of the business), it’s likely you’re putting in your own cash. Or you may have even taken out a loan to get your business going or to help keep it afloat. This mean your personal finances are on the line and take a hit every month that your business profitability is in the red. This could potentially lead you towards everyone’s least favorite B word: bankruptcy. Now, it pays to learn about bankruptcy so you know whether or not this is the right path to take if you’re ever in a situation where your business is losing more money than it’s making, you owe a bunch of people money, and you don’t know what else to do. Of course, you want to avoid bankruptcy if possible, and I share some tips on how to save your sinking business in just a bit.
Your Confidence Takes A Beating
Aside from your business losing money and causing your personal finances to deplete like crazy, your confidence also takes a beating. There could be so many reasons that a particular startup business is doomed to fail, like when an economic recession hits a year into your new business (remember 2007 - 2009?). It’s easy to feel like a personal failure if your business fails, but that’s miles from the truth.
No matter what bumps happen along the road to launching and growing your business, YOU are always enough… even if you may make a few missteps for lack of information and know-how.
What to Do if Your Business Isn’t Making Money
I’ve already covered five not-so-obvious problems that cause businesses to struggle and fail and what you can do to fix them. In this post, I’m going to add a few more things you need to look at if you want to turn your business around and start banking profits.
#1 - Identify the Sources of Financial Bleeding + Stop Them
If you’re struggling to make ends meet in your business, you’ve got to identify what’s causing you to lose money so you can stop it. For example, have you invested in a bunch of tech tools or software that you don’t need or can’t fully utilize yet?
Take online shopping carts. You may have signed up with a provider that has all the bells and whistles and costs a few hundred dollars a month when all you really need right now is something simpler. (Read an in-depth comparison of top online shopping carts.) It’s a very smart practice to keep a spreadsheet of all of your recurring business expenses and audit them regularly to see what you’re not really using, where an upgrade would be worth it or what you can eliminate altogether to save some cash.
Here are some areas of your business to examine and where new - and even experienced - entrepreneurs spend money in ways that strain their finances:
Technology and software
Staff and contractors (read more about who to hire first)
Marketing and advertising
#2 - Take Another Look at Your Offers and Sales Page Copy
You’re really amazing at what you do. Or you’ve got a truly awesome product that helps people. But your sales are next to nothing and you can’t figure out why. This is the time to take a look at your offer itself and the sales copy.
I can’t tell you how many times I’ve looked at sales pages that simply suck. And by “suck” I mean that the copywriting on the page actually un-sells readers with what’s said (or isn’t said) about the product or service. Even if you’ve got killer sales copy, it may be that you’re not offering your products or services in a way that your dream clients really want. Either way, you’ve got a big problem.
At the end of the day, sales is what keeps your business going. And whether you’re selling online or through personal conversations, there are some big offer mistakes that kill sales that you must avoid.
But how do you know if you’ve got a problem with your offer or sales copy?
One of the ways you can tell that you have a problem with your offer and/or sales copy (whether for a paid offer or for a free offer (like a freebie or online challenge) that leads to a paid offer) is if you’re getting a decent amount of traffic to your page, but you’re not making very many (or any) sales or no one is opting in for your freebie. You can look at how many people land on your page versus how many take a further action, like purchasing or opting-in. In the online entrepreneur world, a landing page for a freebie that converts at least 40% of page viewers is considered “good”. (My landing pages consistently beat that with opt-in rates of 50 - 85%.)
Once you’ve identified if your offer or sales copy needs tweaking, you can take the steps to fix them by aligning your offers with what your target audience wants and communicate the value of what you’re offering with amazing copy.
#3 - Create an Action Plan for Saving Your Business
You may feel a bit overwhelmed by all the things you’ve listed out to fix or simply frustrated that it’s been so hard to make your business work. But once you’ve identified where you’re overspending in your business, any places that you can simplify your business’s back-end expenses and operations, and how you might be inadvertently repelling sales or making it harder for your customers, you’ve got a solid place to start. The next step is to pull it all together into an action plan and then follow through with that plan while allowing for necessary adjustments along the way.
Your action plan can be as straightforward as prioritizing what needs to happen first, either based on true urgency (versus perceived urgency) or by tackling the lowest hanging opportunities for improvement. I give you the step-by-step breakdown of how to tackle big projects and be successful in reaching your goals in this post, The Easier Way to Reach Your Big Goals.
This is also where your mindset is critical. It’s really easy to allow feelings of frustration, overwhelm and even hopelessness to take over if you’re on the brink of losing your business or have been struggling to make it for a prolonged period of time. You may second-guess yourself and wonder how to make the right decisions and move forward in spite of how you’re feeling and the fears that come up. I’ll leave you with a last few words of wisdom to help you:
You get to choose how you look at any given situation and how you respond to any situation, which is extremely empowering. When you make conscious choices, you’re much more likely to make the ones that lead to better outcomes.
Any conscious, intentional decision or action is better than no decision or action. If you take the road of “I can’t decide!” and don’t make a decision, the Universe will make one for you. Not making a decision IS making a decision by default and one with which you have no influence over the outcomes. So, even if you’re afraid, make a decision, assess the results, adjust and keep going.
Support yourself through the process, whether that means creating a few extra minutes a day for self-care or seeking the support of someone who can help. When you feel more centered, calm and in alignment with abundance and the essence of who you are, you’re much more likely to get to where you want to be… and you’ll enjoy yourself a lot more along the way!
Some factors that cause businesses to fail can’t be controlled… but others can. Even if the worst comes to pass, don’t feel like this means you’re a terrible entrepreneur or a failure. Keep your head held high and don’t be afraid to try again. Hopefully, though, if you follow the steps in this post, then you’ll never have to worry about this happening to you!