The moment of truth has come. The business is not performing to expectations and your dream to be your own boss is almost in tatters. Time to send out an SOS – save our small business.
A manager does things right. A leader does the right thing. The manager has their eye on the bottom line; the leader’s eye is on the horizon.
You’re puzzled as to what went wrong. You’re looking at the bills that need to be paid and the loan instalments that are due, wondering where will you get the money and how long can you stall payment. Chances are you’re not paying your BAS, GST and possibly your employees’ superannuation entitlements. Apart from the stress and disappointment, the biggest of the many questions in your mind is, how do I get out of this mess?
Apart from the stress and disappointment, the biggest of the many questions in your mind is, how do I get out of this mess?
Human instinct dictates one of two responses: fight or flight. That means you either stay on and fight as best as you can, in the hope that the business is salvageable, or cut loose and run.
However, showing desperation to sell will cause a buyer to offer well below value or even encourage a buyer to hold back and wait for you to fall over so that they can get the business for nothing. In both situations, you’ll be compounding the losses to yourself and your family and extending the postbusiness recovery time.
Before you abandon ship
What do you do in this situation, and how do you know which direction to take?
Looking at the business alone to see if it is salvageable will not give a true and accurate reflection. The emotional and financial stresses may mask positive aspects or opportunities. Here are some factors to consider.
Consumer resilience – How solid is your customer base? Assuming that your gross margins are aligned and benchmarked against comparable businesses, is your venture struggling because there are not enough customers or are there strong demand and revenue prospects against a high cost or borrowing structure? Revenue, margins and costs are your first port of call.
Supply resilience – How supportive are your suppliers and financiers? Are they aware of your financial difficulties? Are they concerned or panicking? Have you burnt bridges with any of them or is there a prospect of continuing the relationships? If there are burnt relationships, are they replaceable with alternative suppliers and/or financiers?
Personal financial resilience – How is your own financial resilience? How strong are your assets and is there any additional capacity to extend borrowings to support the business? On the one hand, you don’t want to throw good money after bad. On the other, financiers and suppliers will not be prepared to take on any additional risk without your show of confidence in and financial support of the proposition.
Business resilience – Having explored your personal financial resilience, you need to consolidate that with the business’s own resilience. For example, having a solid customer base, good margins and cost structures, supportive suppliers and financiers, and personal assets that can be used to support the business – all are good indicators. You now need to know if the business can support additional loans, meaning that the cashflows can meet the restructured financial obligations.
Emotional resilience – How are you coping with these pressures? Is your close circle of family and friends supporting you? Do you have a mentor to help you with sanity check? Do you have the stamina and energy to keep going until you get your business out of trouble? Not only do you have to maintain high levels of energy, but you will have to energise your staff and those around you. You have to lead throughout.
Warren Bennis, a prolific academic on leadership, says this: ‘A manager does things right. A leader does the right thing. The manager has his or her eye always on the bottom line; the leader’s eye is on the horizon.’ If you have a manager in your business; make sure you both understand your separate roles. If you don’t, remember that there will be a time to be the leader of your business and a time to be the manager of your business.
Next week: strategic and structural resilience, and beyond.
Nader Seifen, Head of Franchising & Leasing, Telechoice
