3 Ways to Stop a Business Downturn from Causing a Business Failure
No entrepreneur wants to think about business failure. The possibility is difficult to face. It might sound cheesy, but entrepreneurs invest their dreams in their businesses, not just their energy and money. The prospect of failure can be so scary that it can cause you to turn away from the very threats you’re afraid of.
But if you ignore your fears, you’re leaving yourself vulnerable to them.
Business failure is avoidable as long as you pay attention to the dangers that threaten the long-term viability of your business. There are many threats, from competitors to long-term technology trends, but one of the most insidious is also one of the most underappreciated: business downturns.
Successful businesses grow—that much is obvious. But every successful business also has to weather periods of slow growth, stagnancy, or even decline. If you prepare for a business downturn, it doesn’t have to be a reason to hit the emergency button. You can put a plan into action, surmount business failure, and live to fight another day. That’s what the best entrepreneurs ultimately do.
In this article, we’ll explain how you can prepare for a business downturn without feeling too much stress or anxiety about the natural ebb and flow of business.
The relationship between a business downturn and a business failure
When business is going well, planning for a business downturn seems like a low priority. But even the most successful businesses sometimes have stagnant periods.
A slowdown doesn’t automatically mean you’re going to fail or that you need to panic. The key is to prepare for times when the cash flow isn’t as steady as it once was.
A business downturn can happen for a variety of reasons. Some of these are largely out of your control. An economic downturn, for instance, might suck money out of your customers’ wallets and leave them less able to purchase your products or services.
If you can’t plan for external causes, then you might think that you can just run your business as usual and rely on your normal growth metrics. The issue with this line of thinking is that growth metrics can give you tunnel vision.
Your business might be growing rapidly while a good marketing campaign keeps customer-acquisition costs low. But when you need to move on from one market segment to another, formerly optimistic metrics might collapse in a moment. Your success in one market doesn’t always translate to success in another.
External or internal factors can cause a business downturn, so no matter what, you need to take steps to ensure that you’re ready to survive any cash-flow problems you might encounter. If you’re not prepared, a business downturn can quickly become a business failure.
1. Set a strong foundation.
Even if you’ve been in business for many years, you can always take the time to examine your business foundation for cracks.
When was the last time you looked at your business plan? Even a successful plan warrants regular refreshes. If you’ve hired more employees since the last time you revised it, ask your team for feedback. An on-the-ground perspective might give you more insight than your big-picture view.
Do you have a marketing strategy in place? The best marketing strategies are constantly evolving. If you’re targeting new customers, you need new plans. If you’re incorporating new channels or formats, your strategies need to be ready to use them to their fullest extents.
Have you been actively networking and establishing your thought leadership? That might not seem like a priority when business failure is a threat, but having colleagues and an active audience can get you through hard times—either through direct advice or general encouragement.
When business owners are caught up in day-to-day tasks, they sometimes forget about the foundation that’s supporting the structure of the business. When times get tough, you can always get back to your foundation and strengthen it. However, it’s better to perform regular maintenance on your business instead of waiting for a crisis.
2. Keep duplicate records and boost cybersecurity.
Sometimes, a business downturn isn’t the result of lagging sales; instead, it can be the result of a security incident.
Today, even small businesses are vulnerable to cybercrimes. Are you doing everything you can to protect your data and assets? A 2017 Insureon study showed that only 16% of small businesses worry about the possibility of a cybersecurity attack. This is scary, once you know that, on average, small-business sites get hit by 44 attacks per day.
There are a variety of steps you can take, including using a robust user-management system that includes multi-factor authentication, stop sending and opening email attachments, and building a data-breach response plan. The size of your business doesn’t guarantee your safety. Only a robust cybersecurity strategy—one that also includes what you’ll do if an attack succeeds—will help in the event of a threat.
Don’t wrongfully assume that you’re immune to cybercriminals. Take the time now to safeguard your livelihood.
3. Prioritize innovation.
Are you nurturing a culture of innovation at your business? If not, your products or services may be growing stale while your competitors move forward and steal your customers.
Encourage your employees to exercise their creativity on the job. A diverse workforce, encouraged by psychological safety and a bias toward action, will be more innovative. If you provide employees with training opportunities, they can continue to learn, grow, and add even more value to your business.
The right investment can even lead to a dedicated group, such as Curalate’s research and development team. A good innovation team can develop new products, features, and iterations that will help you overcome business downturns that affect other sources of revenue.
Prioritizing innovation isn’t exclusively an internal effort. Avoiding business failure sometimes means turning to outside help. Find organizations and leaders in your industry that know how to support business innovation—and might even be willing to invest in it. Look for resources, such as this list of medical device incubators from Greenlight Guru, that highlight all of the opportunities for collaboration in your industry.
No business owner wants to acknowledge the possibility of flagging profits. However, smart business owners face their fears and realities head-on. By following the tips in this article, you can prepare for a business downturn, avoid business failure, and thrive.