When you have a tyre that’s flat on your car, you can fix it fairly easily. But when the engine is broken, you have to spend serious money to get it repaired.
That’s often the uncomfortable reality facing a struggling business. Some problems are superficial. Others go to the very core of how the business operates.
I spoke recently to a business owner who poured out a litany of woes about her café. Business is slow, the costs keep rising, and she has invested almost everything she has into keeping the doors open. It’s a painful place to be. When your livelihood is tied up in a single venture, every bad trading day feels personal.
Of course, the economic backdrop does not help. The economy feels fragile. Oil prices climb, uncertainty hangs over the country, and crime remains a constant concern for many small businesses. All of this creates a climate where entrepreneurs feel permanently under pressure.
But there is a twist in this particular story. Just down the road from her struggling café sits another restaurant of a similar type that is doing extremely well. The tables are full, the turnover is strong, and the owners appear to be making money hand over fist.
So what gives?
The answer, as is so often the case in small business, lies in the fundamentals: location, understanding the customer profile, and actively finding ways to attract those customers through the door. A business cannot simply exist and hope that customers will appear. It has to think constantly about who its customers are and what they want.
In the case of cafés and restaurants, this may mean adjusting opening hours, refining the menu, creating a distinctive atmosphere, or finding new revenue streams. Sitting still is rarely an option. The market moves quickly, and businesses that fail to adapt are often left behind.
Still, turning around a struggling business is not like changing a car tyre. It is closer to rebuilding the engine while the car is still moving. It takes time, persistence and often some painful decisions.
The first step is usually a brutal financial “triage”. This is not the moment for minor tweaks. It requires a cold, hard look at the numbers. Overheads must be scrutinised carefully and anything that does not contribute directly to the customer experience or the bottom line has to be reconsidered. Sometimes this means renegotiating with suppliers or landlords who would rather accept lower payments than face an empty premises.
There is also the question of what the business actually sells. In many cafés, a small portion of the menu generates the majority of the revenue. If that is the case, then simplifying the offering may reduce waste and labour costs while sharpening the focus of the business.
Perhaps most important of all is cash flow awareness. A struggling business owner needs to know exactly how much financial runway remains. Without a clear understanding of cash flow, it is almost impossible to manage a turnaround.
Even then, the odds are not particularly encouraging. Many distressed businesses attempt to “trade their way out” of trouble by continuing to operate in the hope that better days lie ahead. Some succeed, but many simply limp along, covering their immediate bills without ever truly recovering. Others eventually run out of cash altogether.
This is where the idea of the “mug’s game” comes in. If the underlying business model is broken — if the location is wrong, the customers have moved on, or the product no longer resonates — then pouring more money and effort into the venture may simply delay the inevitable.
That said, one can only sympathise with a business owner trying to trade their way out of a loss. Sometimes it is the only option available. Closing the doors is never an easy decision when so much effort, hope and capital have already been invested.
If a turnaround is attempted, it has to be done strategically and intelligently. Hope alone is not a business plan. But clear thinking, tough decisions and a willingness to adapt may, occasionally, give a struggling business a second chance.
