adminShelter Chieza Change Management
It is not unusual to lose money in business deals, a lot of businesses have at one point or the other been down this road.
How many of you have watched as digits in your company’s bank account dwindled or spiralled down to uncontrollable levels as debtors refused to pay up and creditors simply took no notice of your crisis?
Making losses is part of business. Most national airlines around the world operate at a loss, but most of them continue flying because most governments want to preserve national pride.
Making losses is part of making money. If you are not prepared to lose money, then you should not be in business.
However, it is important that you guard against the perpetual haemorrhaging of funds from the company.
Losses should not be allowed to continue unabated, so you have to make use of remedial measures when your company starts recording losses.
In most loss-making entities, it is mostly the human capital that is at fault. In most of these the top management tend to be highly rewarded for doing nothing or very little.
In such instances it might be necessary to engage an independent party to come in and run the business for you.
You could be running a company that has negative equity and it is unlikely that anyone would be interested in buying you out.
Take heed that a lot of bleeding may come through incompetence of employees and graft. It will not make sense for you to start reviewing salaries for your top management and executives in the name of motivation.
Exorbitant pay packages doled to these senior executives have been known to be ineffective in raising morale among managers in loss-making entities.
If other methods fail, an immediate restructuring exercise could work.
Try to review the way you interact with your customers — the traditional walk-in customer service model has been replaced with relationship marketing techniques.
A good manager provides leadership with financing options. Try to set the tone for good governance by a constant review of internal control systems and procedure benchmarking it with best practice.
Also have profit urgency in your operations.
The aim of being in business is to make sustainable profits.
When you realise you have made a mistake try to come up with corrective measures and avoid the tendency to become dormant and depressed.
The business environment is littered with business people that have risen to success at one point, but have also fallen into oblivion after their businesses went bust, but the most talked about are those that managed or attempted to rise after their fall.
Financial distress is sometimes necessary in business because it will force you to focus and think about how you can work on improving your profits and cash flow concerns.
Endeavour to review your profit target.
There is need for your company to focus on short-term financial targets as it is critical for the company’s survival.
However, there is always need to keep your focus on the bottom line and operating expenses.
If a division manager was given instruction to only focus on the top line of the income statement (revenues) instead of the bottom line (profits), what will happen if they succeed but do not realise profit?
Evaluation is an important component of reviewing your performance. If you are not so sure, engage companies that assist in projecting your profit levels and ways to achieve these.
What type of losses are you making as a company — is yours structural or transitory?
Remember that losses cannot happen perpetually because your business will eventually die; you will also go out of business.
The best way is to nip the losses in the bud, stop the rot and your business will survive — so keep your head high, what doesn’t kill you will only make you stronger.
Till next week, may God richly bless you.
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