Sometimes, a bad decision or a failed marketing campaign puts a business on the brink of bankruptcy. This is usually the result of incompetent management or a flawed business strategy. But it so happens that errors occur unpredictably, even when, it would seem, everything is done correctly.
If a company is close to bankruptcy due to an unforeseen mistake, but in general the business is capable of making a profit, then it can still be saved.
In this article, we have collected 8 ideas that have helped companies avoid bankruptcy.
Ideas That Can Keep Your Firm Away from Bankruptcy
Your customers are a lifeline for business
A brand needs fresh orders to stay afloat. And the best way to get them is to return to loyal users. After all, it is known that new customers are 5 – 25 times more expensive than current ones. And instead of risking your remaining budget and attracting new customers, it makes more sense to enlist the support of your most loyal customers and focus on them. Offer bonuses and discounts to loyal customers or other privileges. This can be an effective way to keep your business going and cut your marketing costs dramatically.
Start from scratch
Even giant corporations found themselves on the brink of bankruptcy, despite experienced management and advanced marketing. The 2008 global crisis almost caused the collapse of General Motors, one of the largest car manufacturers in the world. According to the results of the year, the company’s losses reached $ 30.9 billion.
Find out the cost
To save the company, the head of GM decided to liquidate OldCo and form NewCo, a new firm with a clean balance sheet. To do this, GM had to go through bankruptcy proceedings. Companies usually resort to this as a last resort, when there is no other way out. To do this, GM divided its assets, but in order to save the company, it needed to get government support. Together with lawyers, a financial plan for the rescue of the corporation was prepared. Moreover, the new company had to be restructured before the liquidation of the old one. In this case, the bankruptcy process was carried out in a few days.
The Russian state has programs to support small and medium-sized businesses that allow it to receive funding from budget funds. But you have to prove that the new company will be profitable.
If the compass is out of order
Sometimes the reason for a brand crisis is the lack of a clear strategy and understanding of which direction is the main one for the business. This is the problem faced by the most popular LEGO toy manufacturer. In 2004, the company was at risk of immediate bankruptcy. To quickly fix the situation, it was necessary to determine what set LEGO apart from the competition. The company was engaged in side projects, but the leaders realized that it was time to get back to basics in order to get out of the crisis.
The main rescue strategy was to work with the production part, which was the main expense item. Then a new principle was formed at LEGO: “The best chef is not the one who has all the ingredients, but the one who knows how to work with the existing ones.”
In the end, LEGO was able to save the brand by focusing on their unique qualities instead of being sprayed on other products.
One business is good, two are bankruptcy
As in the case of LEGO, the Nizhny Novgorod entrepreneur’s company was close to bankruptcy due to its concentration in several areas. Only this time the reason was “sitting on two chairs”. Instead of delving into the processes of one business, the entrepreneur began to develop both a cafe and a coffee shop in parallel. Due to the sharp drop in demand and the rise in food prices, the company began to spend 40% more on food, and margins fell.
As a result, the coffee shop was sold, and the cafe decided to leave. The entrepreneur focused on internal service: atmosphere, time management, quality of customer service, and more. Procurement expenses decreased from 43% to 28%, and revenues in two months increased more than 2 times – from 700 thousand to 1.45 million rubles. The idea is to understand aspects of an individual business as well as its target audience.
Helping hand
If you can’t pull the business out of the hole, then you can find someone who will solve this problem. Crisis managers uncover the reasons for bankruptcy and help save the business. If you turn to them, at least you will find out whether it is possible to save the enterprise. Over the course of 30 years as an anti-crisis manager, David James saved more than 90 companies, both large and small, from bankruptcy.
In practice, James noted that disasters happen even for well-to-do companies with the right business strategies and access to cheap credit. In his opinion, “dying” firms should place greater emphasis not on cash flows, but on the company’s assets.
Conclusion
Even in a difficult situation, entrepreneurs will be able to find a way out if they find the “pain points” of their business and are able to meet the current needs of customers. For example, if business problems are related to restrictive measures, then the solution would be to reorient the business to a remote format. This, moreover, will expand the geography of services and the customer base.
If it is difficult to be torn between several directions or companies, then it is better to throw all your efforts on only one of them. This will give you more time to delve deeper into business processes and understand how they can be optimized.