C.T
Cloudmango Team

Does Your Business Need to Go in a New Direction?

Sometimes in business you have to separate your head from your heart and face the facts. When any of us start up a new business we all have high hopes and will do all we can to make a success of things. However, the reality is that 80% of all new businesses fail within 18 months. Don’t panic though, as there are often easily avoided mistakes that can greatly increase your chances of success anyway.

However, if things do not look like they are going to plan and you are struggling to make your business profitable, this is when you will be faced with one of the toughest, yet potentially most rewarding business decisions. Do you plough on regardless in the hope that by some miracle things will change, or do you start looking at diversifying or changing direction completely before you run out of money completely?

Step 1. Establish clearly why your current business isn’t succeeding


Check carefully why your current business is failing. It can be due to market forces, but it can also be down to mistakes you are making. Scrutinize every single aspect of your business to make sure that you are not the reason it is not profitable rather than the market.

Why?

Because there is no point in changing direction of you are going to make the same mistakes all over again. You have to be brutally honest with yourself when determining what could have been done differently (better). Did you overestimate projected income with your business plan, did you underestimate running costs, did you target a niche market that turned out not to be as big as anticipated, or did you spend too much time trying to run the business rather than actually doing business?

If you realize that it is mistakes being made that are stopping your business from being successful, see whether it would still be better to continue along the same path, but having implemented critical changes. If you are an online retailer you may have suppliers who have raised their own prices and you can’t remain competitive. Can you find another supplier, or can’t you buy in sufficient volume to negotiate a better price?
Once you have established that it is the market and not the business that is creating problems, only then should you begin to look at ways to change direction.

Step 2. Identify what you have learned from your current business


Don’t look at a lack of success as being the same thing as failure, it is not. You only become a failure if you fail to take what you have learned about business, and yourself, and use it to your advantage next time around. Very few of the world’s greatest entrepreneurs succeeded first time. Even Donald Trump, now a billionaire, went bankrupt before he became a genuine tycoon (and President of the USA!).

Take as many positives as you can from the past and use them to your advantage as you move forward.

Step 3. Downscale, diversify, or start afresh?


It could be something as simple as certain stock not selling as well as other lines. It may pay to ‘bite the bullet’ – sell off your slow-moving stock at a loss and reinvest that money in a smaller range of products that you know are selling well. If you are offering a service, examine which aspects of that service are the most profitable, and which you may be losing money on. It may pay you to specialize as opposed to widening your net to attract more customers.

You may have received requests from potential customers asking if you offer a particular product or service that you hadn’t initially thought of. You may find they hold the secret for your success as if they are asking you for something, that means it obviously isn’t readily available elsewhere.
You only have to look at these companies to realise that diversification can work for you:

• eBay used to only be an auction site, but now makes more money from ‘buy it now’ direct sales
• Amazon.com began by only selling books
• Nintendo began business selling playing cards, then instant rice, before it became a global video games giant
• Coca Cola sold Coca Wine before it began selling its cola

The biggest advantage to down-scaling or diversification is that these require less capital than starting a new business afresh. Whether it is retail stock, or equipment necessary to provide a service, you have already paid for these and the premises and/or an existing website. Plus, you have a customer base – contacts and potential leads, a mailing list of people to whom you can announce the changes to your business.

Another major advantage to downsizing or diversifying is that it is less disruptive and smaller changes mean your business remains ‘up and running’ rather than having to start from scratch with no immediate income in sight. Cashflow, or rather lack of cashflow, is responsible for 9 out of 10 businesses that fail.

So, what should you do if you decide you need to start afresh?

Step 4. Starting afresh


From Steps 1 & 2 you will have a huge amount of valuable information that will greatly improve the chances of your next venture succeeding. You will have the business experience behind you that you didn’t have first time around, and also a clearer idea of your personal strengths (and weaknesses).

Too many businesses fail to admit ‘defeat’ and simply throw good money after bad in the belief that ‘things will change’. There is an often quoted phrase which has been attributed to Albert Einstein: “Insanity is doing the same thing over and over and expecting a different result.” Only you can instigate change, and more often than not, that means changing your business, either partly or totally.

And finally…
There is one other thing that you should give very serious consideration to when it comes to reassessing your business opportunities, and that is time.

In any business, “time is money” and often there is a huge divide between ‘being in business’ and ‘doing business’. Only ‘doing business’ makes money, and this is where you need to consider your options.

Many of us want to be entrepreneurs because we want to be in control of our own destiny and we don’t want to work for someone else. However, have you ever considered that for a period of time, perhaps the wisest move would be to do both?

While setting up a new business can be extremely time consuming, once it is up and running, only then do you discover just how much time you need to put in. If your business only takes up four hours of your day and is struggling to be profitable once you have taken your wages, why not consider taking a part-time job or job-sharing? That way you can take the financial pressure off your business and allow more time for it to become established, to the point where one day you will be able to give up your part-time work and concentrate on being a fully-fledged entrepreneur without creating potentially dangerous cash-flow problems.

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C.TCloudmango Team