Is Your Business Model Broken?

by Jeffrey Fanger

Unless you started your business in the past 45 days, chances are you based your business model on an economic system that no longer exists. Cheap credit? No way! Easy access to credit? Not likely. Growth markets? Few and far between.

The research, experience and assumptions you used to make decisions about your business are all out of date in the current economic crisis.

What should a business owner do now?
First, stay up to date on what is happening with the local, state, national and world economy. The biggest mistake you can make is to ignore the crisis and hope everything will get better soon. As a business owner you are part of the economic engine that drives the economy, so what happens to the engine determines whether you can get anywhere.

Second, watch the numbers. I don’t mean the Dow and NASDAQ. Watch your own financial numbers. Use the reporting tools of your financial software to run reports, compare to past years, analyze expenses and receivables, and make projections. If you don’t have your bookkeeping in order, hire someone to help you immediately. Without good financial information on your business, you’re driving blind.

Third, remember that you can’t cut your way to prosperity. While cutbacks may be inevitable in this economy, it’s more important than ever to seek new opportunities. You will see some of your current customers simply disappear and you must find a way to replace them. Possibly the product or service that brought in most of your income is no longer viable (e.g. Real Estate–related businesses). What service or product can you sell that may be more appealing in today’s economic climate?

At Fanger & Davidson LLC we often talk to owners of distressed businesses who think there is no choice but to shut the doors and file bankruptcy. For many of these businesses we are able to develop a reorganization plan that avoids bankruptcy and sets them on the path to growth once again. But be warned – time is of the essence in this process. A business with heavy liabilities but some customers and some assets might be salvageable, but quickly can become a business with overwhelming liabilities and no assets in this chaotic economy.

If you think your business model may be broken, please call or email us to do a Business Analysis right away