When you go to the doctor, they will not prescribe a resolution to your symptom without a diagnosis, similarly with entrepreneurship – large, small or established. To recognize underlying issues, we must complete a diagnosis.
First, what does failing mean? The particular symptom could be inadequate staff, underfunding, poor sales, low quality and many other changes. However, a critical issue often ignored is this: Does this company have the potential to be viable? Indeed, not because you choose to be in the market means there is a scope for the services and goods you offer! Did you do careful market research? Did you pick an activity that merely fits your desires and talents? What was the level of planning you did before you began?
Second, after diagnosing the problem(s), it’s necessary to deal with each matter recognized objectively, methodically and with preparedness to change course. The outcome of this process might suggest closing the firm to stop the drain of cash. It is a good idea to seek guidance from a trusted, experienced individual who will tell you the truth, not merely what they believe you want to hear.
Sometimes, settling the business’s primary strategy and purpose can be difficult because finances (a lack thereof) can confuse you and cause you to attempt a sub-optimal path. That’s why you need to be steady while you raise adequate funds needed to start.
One of my friends advises a business with a significant problem of deciding its decisive path. This indecision led to the company struggling to find its way while consuming cash. Should it go for a niche or try to gain a more significant share of the broader market? The first will produce more scattered customers, higher value-added products, more comprehensive attention to clients and larger margins. The second would be a much bigger market, weaker margins, more customers, more conventional products, less value-added products and apparently less profitable.
Executives debated the two options endlessly and were divided. Meanwhile, the company struggled. My friend asked them to consider three questions:
- Which niche are you serving today?
- Are you serving higher mass-market or value-added customers?
- What are your core competencies?
They tried to work in both markets and did a lousy job in each, so they lost funds. Clients were troubled and returned products regularly. The firm had not recognized core competencies and thus were not utilizing them. Executives concentrated on “making money” to stop the cash seepage. But this plan was not satisfying clients who were escaping. Most of all, while the issue was evident in hindsight, officials did not try to diagnose the firms’ condition; they saw the case as a “cash-flow problem,” which it wasn’t. After my friend’s opening discussion with the owners, they understood the need to diagnose the circumstances to find causes of the dilemmas to fix them. Quickly, they realized their challenge; they were not assisting their customers. Indeed, the firm was not focused; it headed in different directions resulting in the bulky cash drain. Once they discovered the problem’s roots, they made adjustments and set the firm on a solid establishment.