How to Turnaround A Loss Making Business

Half of all small businesses in the United States shut down by their fifth year. This is one of the findings published in a report from the US Small Business Administration. There are many reasons cited for this a non-existent business plan, and lack of capital and poor management are among the most popular reasons. But businesses do not have to shut down if these issues are identified and fixed before they are too late. In this article, we will take you through some steps that one must follow to turnaround a loss-making business.

Stop bleeding money

The first step in turning around a company is to identify where you are losing money in the first place. Stop spending your marketing budget on channels that are not cash positive. Even among channels where you are seeing a positive ROI, narrow down your list to only invest in the top 20% of the channels. This way, you cut down on investments that don’t bring sales and restrict your investments to only the most profitable channels.

It is not a bad idea to cut down on other perks and amenities in your workplace. Businesses spend a lot of money on electricity and water. You could turn off the air conditioners that are not required and the savings from these measures can add up quite exponentially.

Lastly, explore the possibility of canceling contracts and agreements where you are losing money. For instance, you could cancel your lease and move your employees to a coworking space if it is appropriate for your industry. This could save several hundred dollars every month.

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Improve productivity

The next step in the process is to look at ways to improve productivity. Big bang changes with your company’s targets and processes could not only disrupt existing processes but may also require additional resources to execute. You could instead look at achieving a 10% improvement in every metric that affects your business revenue. Take advertising, for example. You could look at achieving a 10% improvement in CTR, another 10% improvement in conversions and a 10% reduction in CPCs. The overall improvement in your revenues are likely to be exponentially higher and enough to turn your net income from red to black.

Reduce cost centers and increase profit centers

Payroll is perhaps one of the biggest overheads in any organization. As the adage goes, desperate times call for desperate measures, and it is completely reasonable to let go of employees who do not contribute directly towards your organization’s revenues. Cost centers within an organization include the human resources team, the systems maintenance and accounting teams. It is a good idea to retain the bare minimum number of workers in these departments. At the same time, turning around a business requires increasing your sales and this would mean an increase in your profit centers. That would include boosting your sales and marketing workforce.

Target growth

Following these steps diligently can help a business minimize their losses and move towards growth. While this is adequate to survive, it may not be enough to get your business back into growth trajectory. For this to happen, your business needs to scale your business. This is achieved with aggressive sales targets and a focused approach towards minimizing any sort of overhead.

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Turning around a business requires a business owner to take some tough decisions. A single-minded approach towards increasing revenue while reducing any factor hindering this is the only way to grow your business and ensure prosperity for your shareholders.

AJ Simmons is a freelance digital marketing consultant for local businesses & non-profits. He is currently the head of marketing & sales at, an interactive widget service to help businesses gather more leads for their business.


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