When The Going Gets Tough

There’s lots of information about scaling up, but scaling down can be just as challenging and just as important.

By Ami Kassar

I have been hearing more and more stories lately about struggling businesses. Here’s one example. A restaurant owner I know in Texas has seen her monthly mortgage payment increase by 50 percent over the last year. Then, this summer, with the brutal heat in Texas, business slowed to a trickle. This double whammy has created a lot of pressure.

Businesses struggle for many reasons, and it can happen in good economic times and in bad. Right now, pandemic relief funds have been exhausted. Interest rates are up. And some industries are having a tough time in this economic environment. Housing is an obvious example, and of course, there are a lot of related industries that struggle when houses stop selling.

What do you do if your business hits a speed bump or even a speed crater? As one person pointed out in a recent post I read, there are plenty of books about scaling up. She was unaware of any books about scaling down. I think she’s right.

Over the years, I have had hundreds of discussions with entrepreneurs who have hit a tough spot. These conversations are never fun, but there are lessons to be learned about how to assess a difficult situation. I wanted to share some of these insights in the hope it will resonate with those in challenging situations today.

Take A Deep Breath

When the world feels like it’s crashing around you, it’s easy to become emotional and overwhelmed. And when you are emotional, you often make decisions that worsen the situation. This is easier said than done, but try to breathe and give yourself the best shot at making rational and clear decisions. A well managed defeat can help pave the way for a subsequent victory.

Find A Support Team Quickly

When you are in a tough spot, being alone is especially hard. Connecting with a group of seasoned entrepreneurs you trust is always a good idea but especially when things head south. Be bold and ask for help. Almost every successful entrepreneur has been through rough patches and challenging times, and most are eager to help. They can be very insightful if you are willing to make yourself vulnerable. But you’ve got to ask.

Stay Far Away From Quick Cash Lenders

If you are in a tough spot, the promise of money in your bank account in 24 to 48 hours can be highly tempting. But these loans or advances invariably come at exorbitant rates with rapid payback terms that will make things worse – not better. Don’t dig a deeper hole. You will be better off stretching payables and cutting expenses.

Evaluate Your Business Model and Expenses

Do you understand what has changed in your business that has created your situation? Is the change temporary, or is it permanent? And how do you need to react? In the example of the restaurant owner I discussed above, the owner believes the weather patterns are here to stay. Therefore, she needs to adjust her financial plan and business model accordingly.

Sometimes, The Answer Is To Shut Down

It’s never easy to acknowledge, but if you and your advisors have concluded that there is no path forward for your business, it’s likely time to shut it down and move on. If so, you will need another set of advisors to consider bankruptcy or other options. I wish I had more to offer about the pros and cons of the various alternatives, but it’s not my area of expertise.

Ami Kassar is CEO of MultiFunding.