Imperatives For Start-Ups

How To Start Over?

Given that none of us prepare to fail, it is indeed the most expected short-coming of success. Such is the case because success is not retained for long, unless the entrepreneur is trained to handle failure tactfully. An entrepreneur having failed at least once is in a much better position to handle off-tracked business performance matrices and other measurement tools that highlight the need for a business to ‘slow down and reflect’. Luckily, if it’s not too late, the business can opt for a turnaround.

Putting all else to rest, a business aiming to do well has to peruse certain strategic decisions with regards to planning, implementation and revision. Despite being precautionary, businesses still fall prey to declining sales necessitating the business to take a detour.

First Things First

Setting straight the fundamentals, the turnaround phase can be skipped altogether if the entrepreneur keeps its business agile, proactive and organic. As identified by Tim Berry, an ideal business planning for a start-up should be geared around the following 5 imperatives:

1. Keep the Planning Simple and Practical. The business plan, not a sales brochure, should have an online presence easily accessible to all stakeholders with a key emphasis on the ‘review schedule’ as the most critical element.
2. Grow Organically.
3. Think, Plan and Test. Revisit and manage assumptions constantly.
4. Match Agile Development with Agile Planning.
5. Stay put on the long-term vision. Details can change.

As pointed out by Akbar Kazmi, Director at JSPE Management Limited at IBA Invent 2010, two of the businesses incubated by JS Group had gone into a turnaround stage much earlier due to cash stuck in receivables and a concentration of clients within one particular sector. Agreeing into the aforementioned, Nina Kaufman discourages an overspending on fixed assets especially on credit that is the ultimate death trap for a start-up. Instead, the business should wisely aim for Venture Capital allowing it to have a debt-free access to extra cash, aligning goals with the lender leading to minimum outflows, and an opportunity to stay abreast of competition.

Taking A U-Turn

A business at the turn-around stage needs to get set on the path of cost-recovery, with stuck-up costs getting diluted and any additional expense breaking-even or translating into marginal profit on sales made. At this stage, a business has three options that can be pursued: to fix it, shut it, or sell it to someone who can fix it.

Ruling out the other two options, pursuing an option to fix the business suffering from declining sales, the entrepreneur should first recognize the need for it, list out what needs to be done for survival and get to it revising processes stagnating business. While doing so, what the business has to be mindful of, is handling business turnaround with realism, keeping the key stakeholders and the key skills intact. In the case of startups incubated by the JS Group that had needed a turnaround much early, effective cash management and a resort to the second tier of customers were taken.

Depending on how thoroughly is the diagnosis carried out, a business can gain recovery following an overhaul of standard business processes like job-costing, financial management etc. As was the case with one of the software clients of Exigent Consulting, low activity levels that had brought the business down to the brinks were dealt with through a site reconstruction and a Pay-Per-Click Campaign.

Businesses With A Thick Skin

As obvious of the example discussed above, the business retained activity levels of before with a renewed marketing approach yet it was the deliverable core product at the heart of it that allowed it to survive.

Mark Blayney, a business turnaround consultant, goes onto discussing ingredients necessary for the success of a business going through a turnaround process. According to him, a business can successfully live through a turnaround if:

1. It is viable to make the core business profitable;
2. There is still time to carry through the turnaround;
3. Funding is in place to take a business through initial restructuring and an eventual regrowth;
4. A clear vision exists along with a motivation to go through with the turnaround;
5. Needed support from all stakeholders is in place;
6. An open communication link exists, restoring faith and confidence in all organizational members.

Drawing from the discussion above, it can be deduced that a business can rule out the possibility of a turnaround if the business starts out with a clear vision, and has an agile structure with a built-in review process. In case there is a need for it, not falling prey to such a situation again will happen when if a business wizens up, takes failure constructively and develops a thick skin!