Focusing on cash flow and customers can help turn your business around.
When your startup struggles, it can be demoralizing. You turned your great idea into a business, and now it's barely staying above water. You're scrambling daily to pay the bills, and for the first time, your confidence is wavering. It's not easy to be an entrepreneur or small business owner. It takes hard work, dedication and a little bit of luck.
While you might feel your business is down on its luck, there's a chance you're neglecting a major issue – other than luck – that's causing your woes. Whether you're feeling the effects of cash flow problems or losing your top employees, there are abundant potential causes for your startup's struggles. Understanding the problems plaguing your company and fixing them in a timely manner can be the difference between finding success and going out of business.
We turned to experts for advice on how to diagnose the core issues and turn your struggling startup into a successful business.
1. Review customer pain points.
Failing to fill a customer need is one of the biggest reasons startups fail. A phenomenal product means nothing if customers aren't willing to pay for it. The best way to figure out if you're a solution to a customer need is to speak with them. You won't help your core customer group by sitting in your office and making minor product tweaks in hopes of a breakthrough.
"Step away from your laptop," said Jemal Swoboda, CEO of Dabble. "So often we think we can sit there and solve our problems and work our way out of a hole by firing off emails and building tech. Get out from behind your laptop. Go talk to your customers."
For Dabble, an online platform designed to help people attend and host local classes and events, getting out and speaking to customers, event hosts and teachers proved extremely valuable. Swoboda found that Dabble needed to spend more time catering to its most popular teachers and classes to better suit customer needs.
By speaking to your customers, you'll discover exactly what they need from products or services. Then you should tailor the product or service to what they want, not what you imagined as your original idea. Speaking to different parties, especially your customers, gives you a better chance of gaining clients and turning initial buyers into loyal consumers.
2. Get creative with cash flow.
Cash flow problems are easy to diagnose. If you don't have enough cash on hand to pay for expenses, you have a cash flow issue. This is a mistake of many startups, which either don't understand how to budget properly or grow too quickly for their cash flow needs.
"They simply don't prioritize what truly matters at each successive phase of the journey – from ideation through development to launch and scale," said Reagan Pollock, an experienced entrepreneur currently serving as the marketing director for Creative Balloons Mfg. Inc. "Cash is more than king. Cash is life to a startup."
With cash flow being one of the most important considerations for any startup, your business should look at all the ways you can cut expenses and increase sources of cash inflow.
"If you are a business owner, I would recommend paying attention to unnecessary expenses and cutting them when cash flow is a problem," said Deborah Sweeney, CEO of MyCorporation. "Think subscriptions, coffee for the office – even extra workplace perks can be cut back during cash crunches."
When it comes to increasing cash inflow, you might have to get a little more creative. Swoboda, for example, turned to Uber and Lyft during tough financial times to generate money for himself, which allowed any extra money created by Dabble to stay within the company. With his business in mind, Swoboda actually uses those car rides to spread the word about Dabble. When riders ask him what he does for a living, he brings up Dabble and comes prepared to turn interested riders into customers.
"I've got a little postcard with a promo code, so I can track people that are actually converting from the back of my car," Swoboda said. "I don't have an exact count, but it's a pretty high conversion rate."
You don't need to drive for Uber and Lyft, but creative thinking like Swoboda's can be the difference between getting the customers you need to grow your business and your startup running out of money.
3. Know when to take a break.
"Making this company a success is currently my No. 1 priority," said Pete Ghiorse, co-founder and CEO of GiveTide, a business making it easier to donate to charity. "But I know myself well enough to understand that sometimes I just need to watch a movie instead of working."
You need to take time for yourself. It might seem impossible, given the countless tasks on your plate, but taking a step back from the daily grind can help you better understand why you started the business in the first place.
"There are tons of very smart people who work very long hours who never take a break," Ghiorse said. "That might work for them, but I'm not convinced that IQ times hours worked equals success."
This doesn't mean you need to take a three-month vacation, but giving yourself time to unwind can lead to clearer thoughts and more energy to tackle the challenges facing your business.
4. Get help from experts.
It takes a team to build a successful startup. Instead of going at things alone, get advice from industry experts, consider outsourcing certain tasks, and surround yourself with a qualified staff. These different parties not only take some of the workload off your shoulders, but also provide a fresh perspective on how to handle problems and set reasonable goals. Jane Muir, a business attorney, believes overconfidence is a key reason why startups begin to struggle. Speaking with experts and staff members can help you turn confidence into an actionable plan to achieve success.
"They have a great idea and they are certain it will work, but their emotional attachment does not allow them to be realistic about timeline, budget and reporting measurable results," Muir said. "Startups have to remember that the ultimate goal is either run the business, sell the business or its assets, or go public. These goals have different administrative and legal requirements to achieve. Consult mentors and experts to decide on the goal and make a realistic plan and budget."
When it comes to turning around your struggling startup, there's no immediate fix. It takes patience and work, but if you focus on your customers and lean on experts, you don't have to give up on your entrepreneurial dream. Sometimes, however, the process reveals that this business venture isn't going to be the one that finds success.
"Righting the ship is also acknowledging when it's OK to get off the ship," Swoboda said. "To the extent that you can, understanding when it's time to walk away is pretty useful."