Running a small business is no easy feat these days. With rising costs, supply chain issues, labor shortages, and customers with endless options, it can be incredibly difficult to keep a business thriving. In fact, 80% of small businesses fail within the first 18 months according to the U.S. Bureau of Labor Statistics.
If your small business is struggling to stay afloat, you’re not alone. The good news is that with some strategic adjustments and perseverance, you can turn things around. This guide will walk you through the key steps you need to take in 2024 to save a struggling small business. We’ll cover evaluating your finances, boosting sales, cutting costs, improving operations, updating your marketing plan, leading your team, and more.
Step 1: Review Your Finances Thoroughly
When business slows down, your first instinct may be to toss as much money into advertising and marketing as possible. But before investing precious resources into acquisition, you need to understand exactly why your business is struggling in the first place.
Take a hard look at your finances and financial statements, like your profit and loss statement, balance sheet, and cash flow statements from the past year. Compare them to financial statements from when business was better so you can spot negative trends and patterns.
As you review, pay attention to key metrics like:
- Revenue and profits: Are sales decreasing substantially? Are you still profitable or losing money?
- Costs: Which expenses are growing and contributing to declining profits?
- Profit margins: Are your profit margins getting squeezed? By how much?
- Cash reserves: How much cash runway do you have left at your current burn rate?
This financial analysis will help you dig into the specifics of why your business is struggling. Once you identify the biggest problems and pain points, you can start to address them.
Step 2: Brainstorm Ways to Increase Sales
To save a struggling business, you need to rapidly boost sales revenue. After all, the lifeblood of any business is generating sales profitably and consistently.
Ideally, aim for 20-50% sales growth in the next 6-12 months. That may sound extremely ambitious if sales have been shrinking, but aggressive goals are necessary for turning business around.
Here are some sales growth levers and strategies to consider:
- Win back lost customers: Re-engage customers who have churned or stopped buying from you. Offer promotions, discounts, or product samples to entice them to purchase again.
- Upsell existing customers: Encourage current customers to upgrade to higher-tier products or purchase add-ons. Even a small uptick in average order value can impact revenue.
- Offer new products or services: Expand your product line to fuel new revenue streams and give customers more options to buy from you.
- Improve conversion rates: For your website, emails, ads and other sales channels, optimize to increase conversion rates. More conversions mean more sales.
- Reduce churn: Understand why some customers cancel or stop buying and fix those issues so fewer customers churn going forward. Preventing churn has a major impact on recurring revenue.
- Run promotions: Strategically offer promotions, discounts, and sales to attract new customers and encourage repeat business. Time these during your highest traffic periods.
- Enhance sales team performance: Invest more resources into your sales team through training, tools, better processes and perhaps more headcount so they can sell more effectively.
The more sales accelerators you can deploy simultaneously, the faster you’ll see revenue growth. Be aggressive yet strategic with sales goals and activities.
Step 3: Lower Expenses Dramatically
To allow more investment into growth while preserving cash flow, you also need to lower your cost structure substantially. This may require difficult decisions regarding staffing, tools, office space, inventory and other operating expenses.
Aim to reduce overall expenses by 15-30%, more if the business is really struggling. Cost cutting may feel counterproductive when trying to boost revenue, but it’s necessary to control cash burn.
Analyze every expense with a fine tooth comb. Here are proven ways to reduce costs:
- Cut excess staff: As difficult as layoffs and hiring freezes can be, they allow you to lower payroll and labor costs substantially while hopefully retaining your highest performers.
- Renegotiate vendor contracts: Seek discounts and improved terms with suppliers, vendors, landlords and other partners to spend less on services and materials.
- Reduce unused tools and services: Audit software, subscriptions, memberships and eliminate any that are underutilized or not providing enough value.
- Decrease marketing budgets temporarily: While marketing is critical for growth, temporarily reducing ad spend can help cash flow until business picks back up. Focus any marketing budget on highest ROI channels first.
- Limit inventory: To preserve cash flow and avoid write downs, limit inventory purchases to match projected near term demand.
- Move to a smaller office: Downsize to a smaller office space to save significantly on rent and related office expenses. Many teams can operate just as well remotely or distributed more broadly across locations.
- Travel and expense limits: Encourage less travel and put in place tighter approval limits on any spending. Lead by example here as the business owner or executive team.
Ruthlessly cutting every non-essential expense frees up cash flow to maintain operations and support growth initiatives that will turn business around.
Step 4: Bolster Operations and Internal Systems
As a business struggles, some foundational aspects like operations, processes and internal systems are often neglected when just trying to fuel short term survival. But restoring and improving your operations is vital for supporting future scalability and sustainable growth.
Take time to step back and examine if there are:** bottlenecks, inefficiencies, technology gaps, data issues, communication problems or capacity constraints** that affect your ability to serve customers well, produce and deliver your products or services, manage devices or applications, and make data-driven decisions.
Then begin addressing those issues with process changes, additional staff, new tools, updated workflows, automation and other operational improvements.
Key areas to optimize for efficiency and scale include:
Inventory and Order Fulfillment
- Ensure you have an accurate demand forecasting process and optimal inventory targets set by SKU.
- Reduce lag time between customer order and delivery with internal process changes and reliable shipping partners.
- Allow visibility across your supply chain through inventory management software integration.
- Automate repetitive fulfillment tasks like shipping status communication.
- Evaluate average resolution times, common pain points and customer satisfaction rates. Set goals for improving key metrics like Net Promoter Score (NPS).
- Smooth out the customer journey by eliminating pain points through updated policies, additional self-service options and new tools like chatbots for faster inquiry resolution.
- Empower customer facing teams to resolve issues independently through access to customer data, product documentation and training.
- Prevent revenue leakage by routinely reconciling payments. Automate reminders for unpaid/late invoices.
- Broaden payment types accepted with integrated mobile, recurring billing and global payment partners.
- Optimize accounting practices around payment processing.
Data and Analytics
- Track metrics that provide greater visibility into all operations like sales forecasts, customer lifetime value, churn rate, profit margins, inventory turns, supplier lead times, etc.
- Build reports, dashboards and analytics to surface key operational insights. Set goals based on the data.
- Provide companywide access to data to enable better decision making.
Addressing operational bottlenecks and system gaps provides the bandwidth and efficiency needed to return to growth. As startups scale into enterprises, building operational resilience early on means not having to slow down growth later just to upgrade systems and processes.
Step 5: Revitalize Your Marketing Plan
Insufficient or ineffective marketing is often a top contributor to declining sales over time. When business is tough, marketing budgets are often the first to get slashed. But smart marketers get scrappy during down periods by refining strategy, doubling down on highest ROI channels, tapping relatable emotion and optimizing spend.
Take time to revisit your marketing plan and identify what’s changed regarding:
Your Ideal Customer
- Demographic, businesses size, purchase motivators
- Where they spend their time digitally and offline
- Economic shifts affecting their spending power
- Market share changes between major players
- New disruptive competitors
- Competitors offering new products, features or services
- Highest and lowest ROI digital channels
- Offline marketing and sales plays driving substantial revenue
- Creative, messaging and offers inspiring engagement and conversions
Then evolve your marketing plan for the coming year across:
Messaging and Positioning: Update branding, messaging and campaigns to align with economic conditions and evolving target audience motivators. Demonstrate you understand customer pain points better than competitors.
Paid Channels: Double down on proven high ROI digital channels like paid search and social ads. Expand keyword and audience targeting to align with search trends.
Organic Presence: Earn more qualified visits by optimizing SEO and content for buyer keywords and topics. Strengthen authority and relevance in your niche with valuable educational content.
Retention Campaigns: Prioritize customer loyalty through VIP programs, special offers, re-engagement campaigns and excellent service.
Reviews and Referrals: Encourage genuine reviews and referrals to increase word-of-mouth traction. Feature compelling stories from delighted customers in your marketing.
Partnerships: Pursue co-marketing with complementary brands to achieve wider reach with joint offers and content promotion.
Testing and Optimization: Continuously test messaging, content types, lead magnets, special offers and other elements to maximize engagement and conversion rates.
The most effective marketing plans evolve as customer needs change. Leverage lower cost digital channels and community engagement to demonstrate relevance despite economic fluctuations.
Step 6: Rally Your Team
When business heads south, it can negatively impact company culture derailing staff motivation, retention and productivity. But an inspirational leader focused on rallying their team through challenging times can regain momentum faster.
First, be transparent about the business challenges to build trust. Clarity across the company prevents rumor mills from spiraling.
Next, reinforce the “why” so everyone remembers your purpose and vision for the company’s future. When times get tough, connecting to meaning and making an impact creates solidarity.
Show empathy through active listening, acknowledgment and responding to input. Invite two way conversations and constructive feedback for strengthening support company wide.
Challenge teams to turn obstacles into opportunities for innovation and growth. New constraints often lead to game changing ideas.
And motivate through recognition, short term milestone setting, and incentives connected to growth goals like revenue targets, customer acquisition and retention.
Keeping energy and morale high demonstrates resilience that your market respects. Don’t underestimate the impact of culture when aiming for an ambitious turnaround.
Step 7: Explore Financing Options
If cash reserves run low, you likely need an infusion to fuel your turnaround efforts. Carefully weigh financing options based on the amount required, use of funds, projected ROI, equity impact and repayment terms.
Common small business financing options include:
- Short term loans: Quick access working capital loans to bridge cash flow gaps. Require steady revenue and fast repayment which can be highly stressful.
- Line of credit: Revolving credit source offering flexible draw down amounts as needed. Need strong credit and financial history to qualify.
- Merchant cash advance: Receive an upfront lump sum in exchange for a percentage of future sales. Easy to qualify but very high repayment rates.
- Equipment financing: Low rate loans for new equipment, machinery, vehicles etc.. Build business credit history.
- SBA loans: Low competitive rates and long terms for working capital, equipment, inventory, expansion costs etc.. Highly selective.
- Invoice factoring: Sell unpaid customer invoices for immediate cash flow access. Expensive fees.
- Angel investor capital: Receive investment funds from an affluent “angel” in exchange for equity. Extremely selective with extensive due diligence.
- Crowdfunding: Raise smaller investments from a large number of contributors through an online platform. Need very compelling brand and story.
Evaluate the near and longer term ROI potential of financing amounts relative to repayment costs. The goal is accessing adequate working capital to fuel your scaled growth plans until achieving consistent breakeven cash flow.
Step 8: Stay Lean and Nimble
Becoming “lean”, both operationally and culturally, enables struggling businesses to adapt quickly as market conditions evolve.
Operationally, scrutinize every expense and process to remove waste and maintain only essentials – AKA a Minimum Viable Product (MVP). Streamline operations for speed and efficiency.
Culturally, foster an agile environment comfortable with iteration, testing and shifting priorities. Maintain an entrepreneurial spirit focusing ambition on growth metrics vs bureacratic processes hindering progress.
Key elements of a lean turnaround strategy include:
- Quick decision making: Rapid prototypes, minimum viable products, pivots based on customer feedback. Testing over elaborate planning.
- Cross functional collaboration: Tear down internal silos by embedding roles across teams. Prioritize company goals over department goals.
- Relentless improvement cycles: Continuous review of customer sentiment, operational metrics, competitive activity. Identify priority areas for enhancing experience, efficiency and innovation.
- Flexible budgets: Dynamically shift budgets and staffing across growth priorities monthly. Grant teams autonomy to direct funds toward highest ROI activities.
- Performance metrics: Establish and monitor metrics for held accountable for outcomes — like customer lifetime value — not just output.
- Streamlined processes: Eliminate back-office bureaucracy that doesn’t directly enable execution excellence for customers. Automate everything possible.
Staying lean, especially during unpredictable times, allows you to nimbly respond to evolving customer needs while aggressively pursuing growth opportunities.
Step 9: Update Your Products
Over time, every product and service risks becoming outdated or less relevant to shifting customer preferences. Keeping your product lineup fresh and aligned to market trends is thus critical, especially when pivoting a struggling business.
Start by auditing your existing product catalog across factors like:
- Competitor benchmarking: How you compare on pricing, features, quality, reviews.
- Sales revenue: Which contribute most/least to overall sales
- Profit margins: Which are most profitable? Which lose money?
- Customer feedback: Pain points, enhancement requests, churn drivers?
- Search volume and demand: Keyword and search trends associated with each
- Technical roadmap needs: Improvements needed from R&D team?
Identify if any current products should:
- Get removed from your portfolio based on lack of demand, competitive parity, operational complexity to support etc.
- Get combined or split into new variations to optimize profitability and appeal.
- Get upgraded with new features, integrations or components customers want.
Then explore building net new products in adjacent categories with appealing growth potential you can expand into. Prioritize innovations aligning to customer needs identified through research, feedback and industry developments.
Updating your product lineup for maximum profitability and relevance ensures existing customers have reasons to purchase more from you while attracting new customers that competitors may overlook.
Step 10: Set Monthly Growth Milestones
With an ambitious turnaround plan fueling rapid change, establish clear 30/60/90 day targets across key growth metrics to maintain focus on outcomes most vital for success.
Ensure you and your leadership team obsessively track and discuss:
Monthly Sales Growth: Because ultimately, more revenue solves most business problems. Do whatever it takes to hit sales goals through some combination of new business pipeline growth, customer retention improvements, product/services expansion and conversion rate optimization. Compensate teams heavily around sales targets.
Burn Rate or Cash Flow: Keep one eye firmly tracking how much runway remains based on current cash burn rate or cash flow levels. Make difficult decisions early based on thresholds so you don’t run out of resources to execute high impact growth plans.
Customer Lifetime Value or LTV: Demonstrates the long term revenue generation value of the customers you acquire now. Useful for determining how much CAC payback you have room for and where to set sales team commissions.
Customer Acquisition Costs or CAC: The total spent on marketing, sales and account management divided by new customers generated. Optimize both acquisition volume and costs over time to reduce.
Net Promoter Score or NPS: Measures customer satisfaction and loyalty via their likelihood to recommend you to others. High NPS signals products, service and messaging resonating.
Ruthlessly tracking and optimizing monthly performance across these operational metrics will accelerate your ability to course correct quickly if certain areas lag. With proper focus and discipline, you give your business the best shot at recovery.
Turning around a struggling small business with declining sales is genuinely hard work. It requires making difficult decisions, sacrificing short term profits for long term prosperity and pushing yourself and your teams relentlessly toward an ambitious vision of future growth.
But implementing even a portion of strategies above around lowering costs, driving sales, improving operations and customer experience, updating marketing and getting lean FAST can build momentum.
Stay resilient. Boost morale daily. Learn from failures and celebrate small wins. Adapt to fluid conditions. Ask for help when you need it. Persist each day.
With an empowered team and smart strategies for seizing micro opportunities every day, you have the power to take a struggling business and transform it into an industry leader over time.