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How To Turn Around a Failing Business - YouTube
Channel: Dan Martell
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- Am I in frame?
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- [Josh] That's exactly
what I need you to do.
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(upbeat music)
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How to turn
around your business.
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This is a very serious video.
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If every month you're looking at
the numbers and it's going slim,
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alright, if you're feeling
embarrassed because you don't
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feel like you've made some great
decisions or your arguing or
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frustrated or you have loved
ones that care about you and
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have been telling you this.
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If you know in your heart
that it's that if you don't do
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something today that you might
sacrifice the whole business,
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and a lot of guys may even
have personal lines of credit or
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personal guarantees
in your business.
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I want to teach you guys a
very simple here's what I do,
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you know?
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To turn businesses
around to the point where
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they're profitable again.
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They're actually generating cash
and you know what you're getting
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paid a great salary.
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I mean that that's one
of the first things he goes.
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I'm not gonna take a salary.
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That's not gonna
solve the problem.
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I'm gonna walk you through
exactly how to do it so that you
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have the financial optics to
understand how your decisions
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impact revenue, impact
expenses and profitability.
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Alright, that's what I'm
gonna share today because,
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you know, a few months does work
with one of my clients and they
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had great growth.
This is the challenge is.
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Most entrepreneurs are
growing really well, right?
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They were doing a little under a
million revenue but they're up
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from 300,000 the year before
so when they're looking at it
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they're thinking we've doubled
or tripled the business in the
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last year but they didn't
look at their profitability.
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They didn't look at the
expense structure to say,
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"Where's the profit?"
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Do we have the cash to actually
scale the business and are we
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charging what we need to
actually grow and continue this
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rate of growth. Right?
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That is the challenge of most
businesses run into or they make
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a decision and they go off in an
open up a new location or a new
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division in their business and
they don't ask themselves what's
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the capital requirement,
the cash,
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that we need to do is?
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What's my timeline and horizon?
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What's my marketing program to
make sure that I get those new
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clients to support that new
business and it's always this
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game and then
once it's out there
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how you shut it down, right?
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So the first thing
I'm gonna encourage you
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to do is get the numbers.
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Here's how it works.
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You call the accountant, okay?
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Most of you guys probably
don't have great accountants.
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Here's what I want you to know.
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Accountants don't give a crap
if you fail as a business owner.
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They don't.
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And it's not
because they're bad people.
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Their job is not
to run your business.
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Their job is not to
understand your decisions.
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Their job is to take the numbers
you give them and post it based
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on GAAP accounting practices and
to give you back the reports and
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for you to understand
the financial literacy
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to make the decision.
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So you might be upset with your
account and say well I have the
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dumbest accountant in the world.
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Why didn't they tell
me things were this bad?
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Trust me, it's not their fault.
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It's yours.
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You should've built financial
literacy into your understanding
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of running a business.
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But the number one thing
you need to do to start the
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turnaround is get
all the information.
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Get all your
credit card transaction.
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Get all your lines
of credit transaction.
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Get your bank accounts.
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Get everything.
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Get the expenses.
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Get all the numbers.
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Your P&L, your income statement,
your cash flow statement
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whatever you get
from the accountant.
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How much tax do you owe?
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How much payroll stuff?
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Like all your
exposure, your liabilities.
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Get all the information, the
real numbers not what you think
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it is because a lot of
entrepreneurs when they're
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watching this video they're like
that's where I'm at right now.
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It is you're probably worse than
you think 'cause you probably
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don't want to look at it.
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You need to get all the numbers.
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Number two, is
create a financial model.
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A simple, I'm gonna give you
the simple financial model is
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essentially a
cash flow projection.
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It's saying what's my income,
what's my expenses,
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what's my profit and
then what's my liabilities?
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Understand how
your business operates.
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How much money does it make?
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What's the profitabilty level?
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Most businesses because they
have so many decisions they've
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made they don't
have this in one spot.
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It's a spreadsheet each
month it's projections, right?
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Wherever you're at now this
month just get the information
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and then start a new
spreadsheet and put it there.
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Look at the customers, look at
the previous year's revenue to
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get some estimations
but don't make it up.
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Make sure that it's real numbers
because I don't want you end up
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back in his position. Right?
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The worst thing you could do
right now is put the time and
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energy in and make
half-ass decisions.
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That's not gonna support you.
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I really want to help
you turn things around so
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you get all the numbers.
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You have those
uncomfortable meetings,
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you talk to your accountant.
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You give them a sense of urgency
and say look I know you haven't
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finished the books and we're
only halfway or we're at the end
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of the year, I need the numbers.
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I'm gonna come to your office
with my shoe box of receipts and
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we're gonna get this worked out
but you gotta get the numbers.
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Creating that financial model
is gonna allow you to understand
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how bad it is.
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You know, and unfortunately
every time I've been asked to
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come in and turn around a
business it's always worse than
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the entrepreneur thought.
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They're always losing money,
this new division is sucking the
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profit from this business.
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This new software initiative,
I get that one all the time.
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I've got a service business, I
want to start a software company
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and I'm funding it and I never
occurred to me that even though
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this is highly profitable
that new business or division or
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department is sucking the
profit out of the business.
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So we need to get
real on where we're at.
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Then you do number three which
is the toughest one and I always
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encourage entrepreneurs just
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get ready for the
worst case scenario.
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You're not gonna
lose sleep anyway.
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You might as well just get ready
for the worst case scenario and
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that means cutting deep.
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When you do
layoffs in your business
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you can't do
surface level things.
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You can't do surface
level expense cutting.
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You need to go deep.
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You need to cut through the fat
and hit the bone like it needs
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to cut all the fat off
the business and say what only
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absolutely need to
run our business. Okay?
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If you're not profitable,
it's only a matter of time.
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If you look at a cash position
in your bank account and you go
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okay we have a few thousand
bucks but all that's accounted
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for, you're weeks
away from insolvency.
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If your line of
credit's maxed out,
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if your credit cards
maxed out, all these things.
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If you only get a
small percentage of available
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potential borrowing
avail, like that's just bad.
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Your business shouldn't be like
that so you're gonna have
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to cut the expenses.
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You're gonna have to cut deep.
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I always say cut
past just the fat,
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get into the bone
you want to hit the bone.
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You're gonna have those
uncomfortable conversations.
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Look the reality is if
you got to lay somebody off,
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you're not obligated to pay
them past that point you have a
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business to save, right?
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And I know that you want to do
what you can and do right and
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these are family and these
are people you care about and
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I totally get that but the truth
is if you're at this position,
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the decision's made for you.
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Right, if you just logically
look at the numbers and say you
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know every month I'm losing
thousands of dollars in revenue
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then you're giving that up.
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You're causing potential for
your family to lose their home.
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Especially if you
have personal guarantees.
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That's the part that hurts me
the most is when I see these
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businesses and they don't
realize like that credit card's
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personally guaranteed.
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That bank loan,
that line of credit,
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that's a personal guarantees.
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If the business falters it's not
the vendors that you money to
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it's the fact that the bank's
gonna come for everything else.
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You're putting your family and
your children's lifestyle at
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risk and that to me
should be enough for you to make
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those tough decisions.
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Look, if you feel about laying
people off just think of this
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way go and serve them by
trying to find their dream job.
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That's what I always do
if I got to lay somebody off,
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you know, I'm
gonna make the decision.
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I'm gonna follow the law,
I'm gonna give their termination
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notice and then three days later
I'm gonna sit down and do the
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work to find them a dream job.
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That's, if that's hurting you
for making this big decision,
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that's the way
you can approach it.
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If you have a new division or
business and you're just you're
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feeling embarrassed of cutting
it off or shutting it down,
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it just is what it is.
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Look at the end of the day when
you turn this around and I know
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you will if you follow
this process nobody will
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remember the failures.
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They only remember the success.
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You could be, you know, you
could have to lay off more than
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half your team and turn the
business around and people will
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only remember that part.
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And I know it's tough to see
today but that's what you do.
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Number three is
go deep get the cuts.
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Four is focus on your customers.
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If you have customers still
around you need to get on the
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phone with them and just ask
them how can I create more value
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for you in the work we're doing?
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You need to make sure that
the current customers are happy
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because if you've
been in that spot,
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you've been
probably putting out fires.
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You haven't given everybody
the right attention and
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they might feel neglected.
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So you want to get on the
phone, schedule the calls,
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make sure they're happy 'cause
the last thing you want at this
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point is to have
somebody not paying an invoice.
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Or have somebody fire you or
have a bad customer experience
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moment within
your service business,
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your product company,
whatever it is.
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Make sure the
customers are happy.
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That's number five.
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I think that that is the best
way and if you give you're a
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great entrepreneur you probably
have customers that want to tell
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you how much
they appreciate you.
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They don't need to know about
the restructuring but you need
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to make sure that they're happy.
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Then it's all about sitting down
and saying what are the lessons
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learned because at the
end of the day these are tough
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decisions and if you don't
sit down and reflect and do a
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postmortem then your you're
very likely to make them again.
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What caused you to
get in this position?
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Likely it's taking
your eye off the financials.
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It's not looking at
your cost structure.
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Thinking you're doing
great top line revenue but
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you're not being profitable.
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It's not hiring
the right people.
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It's not having the
right advisors in position
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to help advise you.
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Maybe it's not having the
accountant but I'm not blame
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the accountant because at the
end of the day you hired them so
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how did you end up deciding
that that was the right person?
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How do you change that decision
and approach so that you don't
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get another person
just like them, right?
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So having great advisors
be able to guide you is key.
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The last step
for me, number six,
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is to build it back up.
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Right, once you get your
top line revenues in check,
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you reduce your
expenses and cut deep,
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you get the business righted you
start paying off those debts.
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You put a plan together and you
start being profitable again,
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giving yourself a fair market
salary for the work you do then
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you need to start
really thinkin' about
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how do I build this up?
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Not doing something crazy,
not investing another business,
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not opening another division in
my company but doing more of the
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things that I know
how to do that works.
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Is it repricing things?
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It is insuring that you have
the right margin structure.
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It's going after the market and
doing marketing or whatever it
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is but building it back
up is the next steps to
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turn the business around.
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So the truth is is
business is all about
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expansion and contraction.
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It's never a linear growth.
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It's always step functions of
growth and if you find yourself
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in a spot where you're
literally month-to-month,
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you have no
cash in the business.
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You've been challenged.
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You're frustrated
you're not sleeping.
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You know you need to
make those tough decision,
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this video is to give
you the encouragement,
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the steps, the process
to get the numbers, right?
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Step one, get
everything all the information.
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Build the financial model and
the projections to know what is
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this really look like
going forward if I don't make
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decisions and if I do how
does that change my projections.
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Cutting deep,
getting rid of the fat,
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hitting the bone, that's key.
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Focusing on the customers that
you do have left over and make
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sure that they're super happy
then figuring out what are the
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lessons learned out of this
whole process so they don't end
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up back here in
another three years?
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And then finally, focus on
building it back up so that you
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can be proud of yourself and
rebuild the confidence that you
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may have taken a hit
on as an entrepreneur.
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So I hope this video find you
incredibly well even though it
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sounds like you're probably
having a challenging time,
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I want to give you
that framework to help
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you get through it.
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But step one's schedule
the meeting get the numbers,
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get the financial projection
and just look at what it is for
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really what it is and
take the emotion out of it.
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I want to challenge you to
live a bigger life and a bigger
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business and I'll
see you next Monday.
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If you like this video be sure
to subscribe to my channel and
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I'd also encourage you to
join my newsletter where I share
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invites to exclusive events and
other free training videos and
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if you're ready to get going I
have a couple queued up for you.
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See you next week.
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