I recently interviewed a client who endured 18 months of losing $5000. per month until finally cutting losses and shutting the door, but the damages have wiped him out leaving him in utter personal destruction. 

Another client kept an underperforming location which posted losses from the first day it opened for over two years wiping out business reserves and all personal wealth, in addition to wiping out insurance cash values, credit cards maxed out and eventually forcing him to default on 941 payroll taxes which later caused huge issues with his performing stores  causing total failure.

I see it so often, and it is an act of self destruction, yet it is so common.Business owners experiencing losses for a month or two or three is understandable, short term losses are a natural part of business. Seasonal variations, marketing adjustments, receivables aging a little longer then expected,  mistaken assumptions that require adjustment, higher then anticipated overhead burdens, and on and on it goes.Losses happen. Mistakes occur, the unexpected happens. But we must respond.

For how long must a business owner endure loses before he does something about it? 

The issue is only partly the length of time, its also what you are doing about it.

We understand at least one basic principle that is operating here, that if you do the same things over and over you will get the same results over and over.

Yet business owners seem to have either forgotten this principle or choose to ignore it…. to their personal demise and ultimate self destruction. 

Here is the pattern. A business owner makes a miscalculation underestimating revenues or underestimating expenses, costs, and overhead or some outside force intervenes and reduces revenues or increases expenses throwing a business into the red.

What does the busines owner frequently do in response to experiencing losses to change this reality?Just as frequently….nothing. Waiting for things to change, working harder doing the same exact things, losing money every day and watching it go down the drain. In essence liquidating his business and self.

Worse yet, as the business erodes, the business owner invests and invests and invests everything he can beg borrow or steal in an attempt to “prop” up the business waiting for things to change for the better. 

I see credit cards maxed out and eventually defaulted, cash values of insurance policies borrowed to the max, payables aging indefinately, and eventually 941 payroll taxes unpaid, the ultimate death knell.  This will go on for many months maybe even years until every cent available is used, unproductively I might add, and the business owner, with his business in the same negative position, is either forced out of  business by the feds, the foreclosing banks or the simple reality that he has insufficient funds to last another day. He is forced to close the door and lick his wounds, without any support or options, or a plan.

In all due respect, the business owner is suffering from a basic entrepreneurial disease… eternal unrealistic optimism,  eternal undying commitment, unwillingness to give up and a refusal to take responsibility for the situation and do something about it. Thus they endure a slow erosion leading to a slow death.

Yet this happens over and over and over.

What is is the answer? A response. A positive and effective response.  Stem the losses, increase revenues, balance the program so it at least breaks even, or shut the doors before you loose it all. Live for another day.

It is not giving up. There is no reward for self destruction, Custer should have retreated. It is not about saving the jobs as they will soon be gone anyways. It is not about pride, ego, or saving face. It is not about failure. IT IS ONLY ABOUT MAKING SUCCESSFUL BUSINESS DECISIONS. Decisions that either cure the issues or allow you to get into another game, with ammunition, resources and assets.

Change is the operative word, when you see the losses and can identify the reason either cure it if you can or close the doors as rapidly as you can, either decision is effective, no decision is an act of self destruction. 

What can you do in view of ongoing losses:

1. Reduce payroll, just do it.

2. Adjust marketing plan, immedietaly, get creative, find a way to boost revenues.

3. Lower overhead, you can control this, even if it means moving, or default on a lease.

4. Change make or buy decisions.

5. Reduce inventories, at any cost, its found revenue.

6. Close out non profitable lines, products, services, yes you can.  

7. Close unprofitable stores, warehouses, offices, immedietly, irrespective of leases.

8. Put employees on incentive based reward systems.

9. Break leases.

10. Stop paying credit cards. 

Do whatever it takes to balance the budget, its arithmetic.

But do not stand still, waiting for the issues to fix themselves, waiting for the big order, waiting for something to happen although you do not know what it is.

The beautiful thing about small business is one can change everything today and experience the positive results tomorrow.

All it takes is management to create a plan and implement it… make a decision. This is what a business owner should be doing, survive to fight another day, not allowing himself to go down the drain while waiting for something to happen.

If you are in this position and do not know how to navigate out of it, call me ask for help. There is a path, a way, a positive conclusion and a profitable transition.

Accepting losses month after month without a plan which makes adequate changes to your formula to allow you to anticipate a break even operation rebuilding into a positive success is a business owner without leadership, and is he is likely to go down with the ship, which may be admirable and expected in the Navy but not in business.  

You can do something about your position, make a decision to win,  and once you start remodeling your business you will find the way to balance your operating equation.  

Call if you need some help.