Reasons why businesses die, struggle and win during COVID-19 pandemic
This post was published during Coronavirus outbreak in April 2020.
Through my line of work, as a business consultant, I have the privilege to work with and coach tens of entrepreneurs a week during group coaching sessions and 1-1 session/custom projects.
I can see firsthand how they approach the current pandemic and global crisis, and I was able to identify patterns of behavior that lead to vastly different results. Results so diverse - from closing the business to fighting for survival to thriving during the global crisis. Below are the most common reasons why businesses struggle (and those that win, do the exact opposite).
Verification time - business or hobby
This one hurts, I know, but the situation we have all found ourselves in separates businesses from hobbies. Lots of online and offline entrepreneurs approach what they do as if it was a hobby. They are not looking at numbers (costs, sales, costs of goods sold, margins, forecasts). They are not working on proper business and marketing strategies. Instead, they focus on vanity metrics of likes, shares, followers and Tik-Tok views on social media that have ZERO impact on their sales. Yes, they do make some money, but it feels almost as if it all was a bit of luck. They just "happen" to have X people in the store or visits to their website or have Y number of sales. This is not a result of planned, thought-through actions that they have control over, but a result of luck and "it was a good day for business."
And some of those businesses have such big potential that it hurts to watch them not realize it. Think about it. If whatever you do sells and makes you some money without any of the "business approaches" to what you do, just imagine what it would be like if you had applied the strategies you need and stopped focusing on stuff that doesn't matter.
I touched on this point already above, but this is huge, and we need to go in more detail here. You know what they say - If you don't run your business, the business runs you. If you "go with the flow" and just let the external factors and randomness of sales be the judge defining whether your business grows or not, you will find yourself in trouble. Hope and luck are not replicable. You need to drive this thing called a business and be in charge. You need to understand your business and how it works and what is the driving force behind it. Ask yourself these questions and build a strategy that will maximize your efforts:
- What type of clients are bringing you the best results
- Are you better off working with fewer clients at a higher price point or would it make more sense to work with clients at volume
- What is the best offer you have, why does it sell so well, what can you do to make it even better, should you focus on this offer only, can you/should you increase the margins
- What is your cost structure and how to reduce your costs, ultimately making your margins higher
- What are your competitive advantages and how you can leverage them against what your competitors are doing
By far, the biggest mistake I see entrepreneurs make is a lack of strategy and planning. This leads to a lack of strategic action and putting fires down and being reactive instead of being proactive. The business has to be proactive and is never a "set and forget" situation. Change, adaptability, constant research and movement towards goals is where you win in business.
But you cannot move towards the goal if you don't have one. If you are letting your business just run freely without proper management, you will find yourself in a place where you did not want and did not plan to be (well, because you were not planning at all).
Audit, monitoring and transparency
Businesses large and small need to monitor their situation. During times like this, you need to audit your situation. Identify where your business is as a result of the crisis. You need to look the current state of things in the face, have full clarity of what the situation is and total transparency for your team and employees. Only when you know what the situation is, can you effectively build a strategy that will get you out of it. Hiding your head in the sand and trying to "wait it out" will not help. Start by asking yourself these questions:
- Have you lost clients? How many? Why?
- Can you still sell your products/offers? Why/why not?
- Have you lost revenue, and how much?
- What is your margin? Has it changed? Why?
- What are your cash flow and cash situation?
- How much longer can you stay afloat with the current state of things
And now, come up with answers to the following?
- How can you get your clients back, what is the reason you lost them? Was it because your offer does not fit their needs anymore (read more on offer-market fit below)?
- How can you secure more cash flow?
- How can you reduce your costs?
- How can you increase efficiency to sell more/at the higher volume/with higher margins?
- What other products/services can you offer?
Offer - market fit, pivot and creativity are the name of the game
One of the foundations of any business model is the offer-market fit. Am I selling what the market wants at a price they are willing to pay?
Right now, many businesses I work with find themselves in a situation where that offer-market fit is no longer there. It is not there because the circumstances around all of us changed. It is not your fault. Your clients/customers needed to shift their attention to offers that are helping their core business. Remember that if your clients are smart, they will cut out anything that is NOT helping them stay above the water or grow during this time.
If your offer is a "luxury" for them right now and not in their "essential goods" category, then you need to do something about it, fast. You need to understand where your customers' head is at, what they need and how to give it to them. Yes, it might mean you need to pivot, tweak and adjust, sometimes completely redefining your strategy and a business model. But it is essential that you do that, the sooner, the better. Creativity is the name of the game now.
By helping your clients survive, you are helping your business survive and grow. It is a simple domino effect - if your clients don't have customers, your client won't' be able to afford you, and you will lose them. Help yourself by helping your clients survive and grow.
Romantic relationship with your business
"But Mike, I've been working on building this business for years. I am not going to change everything and shut it all down." I hear you. But you need to break this rather romantic relationship with your business, products and offers and adjust to the current market circumstance. The role of business is to make money. If this piece is not working, you don't have a business. Face reality. In times like this, you need to adapt. If you refuse to change, YOU will kill your business. Not the crisis.
Communicate with clients
To deliver (sell) solutions your clients need, you need to know what they need. It is every business owner's responsibility to understand the needs of your market during "normal" market circumstance, but now this task is even more critical. The best way to understand what specifically they need, why and what is the best way to deliver the solution (product/offer) is to talk to your clients.
It is time to pick up the phone, open your email client and reach out to your clients—one by one. You need to understand what is their business situation if they are struggling, how the crisis is impacting them, what do they need now to keep their core business, what do they need to grow or survive. They will tell you all that because they desperately need your help.
Speed of change
I have seen so many great ideas in the past weeks. Amazing solutions to real, specific needs just begging to be deployed RIGHT NOW. But what kills businesses, even if they have those fantastic ideas, is the lack of speed in implementation. You cannot wait because the circumstances change so rapidly. If you have a solution to today's problem, fixing it three weeks later is three weeks too late.
Follow the money
Another mistake I often see is not focusing on where the money is made in the business. If your core business is making money, you need to do whatever it takes to save it and grow it. This is another reason why you should do an audit of your situation. Identify what is your cash-cow and go all in to make it as profitable as possible and to ensure it is safe moving forward. But if your core business died because of your circumstances and there isn't anything you can do to save it - pivot, adjust and innovate.
Most of the problems start with the lack of proper strategy in the first place. If you want to thrive in any business, you need to be strategic and execute according to a plan. Because "If you don't have a plan, you become part of somebody else's plan." ~ Terence McKenna
If you want to learn more about why most businesses fail and what is a missing piece in most businesses out there right now, causing hundreds of companies to fail (and how to fix that)...