How to Turnaround a Loss-Making Business
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There are so many startups and mid-time brands who give up, running in a loss being a major reason. Only recently PepsiCo India has turnaround its business, making a profit of Rs 190 crore in 2017-18 after a gap of 7 years. It’s understandable how tough it could have been for a brand of PepsiCo’s stature to recover from a major loss. Moral of the story? If PepsiCo can turnaround its business, given that it had much more to lose, YOU can too! Read on to know more…
Prevent the bleeding of money
First and foremost, to turnaround a company you need to recognize the sector draining off money the most. Curb spending the marketing budget on channels which aren’t cash positive. Also, invest only in the top 20% of the channels showcasing a positive ROI. Thus you restrict your investments to only the most profitable channels.
This may be hard but you will need to cut down on the perks and amenities in your workplace. A lot of money is spent on electricity and water. So, you could turn off the air conditioners when not required, these small measures can add up exponentially to your savings.
Lastly, explore the possibility of canceling the contracts and agreements draining money. For example, you could cancel your lease and move your employees to a co-working space if it is appropriate for your industry. This could save quite a lot of money every month.
The next important step is to improve productivity. Such drastic changes can disrupt existing processes and also demand additional resources to execute targets. Instead, look at achieving a 10% improvement in every metric affecting your business revenue. The overall improvement in the revenues is likely to be exponentially higher and enough to turn your net income from red to black.
Reduce cost centers and increase profit centers
Desperate times call for desperate measures, and it is completely reasonable to let go of employees who don’t contribute directly to your organization’s revenues. The cost centers within an organization include the Human Resources, the Systems Maintenance, and Accounting teams. It is wise to retain the bare minimum number of workers in these departments.
Simultaneously, turning around a business requires increasing your sales which indicates an increase in your profit centres. This includes boosting your sales and marketing workforce.
Diligently following these steps can help to minimize losses and move towards growth. While this is adequate to survive, it may not be enough to get your business back into a growth trajectory. This is achieved with aggressive sales targets and a focused approach towards minimizing any sort of overhead.
This article was initially published in Franchise India by Smita Nag.