It is a recorded fact that 50% of businesses fail in the first 5 years. A whopping 22% of these don’t get passed the 2 year mark. Unemployment rates have rose at staggering rates to 7.9% and counting. Many of these are not blue collared workers but business men and women just like you and me. People who were doing great 5 years ago find that their homes and prised belongings are but distant memories now. A lot of these losses could have been prevented if business owners knew how to stop the bleeding from their failing company. A total of 70% of businesses fail due to lack of sales. Sometimes targeting this area can help, but there are several aspects to be addressed here.

Even though 78% of businesses will make it through, there are going to be times that a business may enter “declining” mode. There will be hemorrhaging and bleeding during these phases, and knowing how to stop that bleeding will determine if your business sinks or stays afloat. There is no promise of smooth sailing after the 2 or even 5 year mark. These numbers are not limited to small businesses and entrepreneurs, but they include even the largest of businesses.

Poor cash flow, poor management, economic down turns and rising costs are just some of the things that you may face or may have faced. The first notion that you perceive that your business may be failing it is time to take immediate action to improve the situation and stop the bleeding. This is where you will have to THINK BIG by stop doing what’s not working and start focusing what is working, you might say but that’s so obvious? It sure is very obvious but from my experience since 1989 working with failing businesses, when they are under pressure the obvious is not so clear and obvious to the management trying to turn the business around. Sometimes it pays to stand back and take a look or have an expert step in and look with a fresh set of eyes; you will be amazed what you will discover.

Look for credible sources that you can trust to offer you genuinely helpful advice. Examine the situation. What cuts can you make, and what improvements can be implemented both short and long term. Take a hard long look at the structure of your business. Most of the times you will find the answers to discovering the profitable core of your business are not hidden, if you know where to look. Be prepared to step outside of your comfort zone and make some tough calls like laying people off. At this point you will have to keep in mind that it is about the survival of the company and you must make decisions with your head and not your heart. If you cannot make the tough decisions you may end up one of the 7.9% of business men and women just like you standing in unemployment lines across the country.

A Failing Business is not a Dying Business

Do not give up or head to the Insolvency route just yet. This is a time where you must think big, bigger than your problem and bigger than your own thinking. You might have tried a number of different things or even got professional help, but if your business has not folded do not give up fighting. It could be just one single thing that could turn your whole situation around. Giving up is not the answer, looking for the right solutions is.

Look at some common handicaps or “hemorrhaging” that a business may incur: long term leases, high rents and expensive loans.  There are legal ways to help you reduce your company debts (see the help of an insolvency auditor). Once you are aware that there is no way the company can service its creditor’s payments then you will need to restructure your payments with your creditors. I am not saying to go file for liquidation. Call you creditors, because they will be willing to negotiate if they know your only alternative to working it out with them is insolvency. Remember, they want to get paid; they might not be happy about it but will be willing to restructure your outstanding debts and oftentimes even settle for less than the sum owed.

How is the market for the products or services that you are providing? What can you eliminate or add to improve profits from loss scenarios? Action has to be taken to make sure you reach break even point as quickly as possible. You have to think outside of the box, be daring and leave your comfort zone to think outside of the box. Get creative. You put all your money into the business, so put all your efforts into saving it. Do not be afraid to take risks. Sometimes even increasing the prices can help gain sales, lowest price is not always the best, as someone will always be lower than you sooner or later. You must be strategic. Insolvency should be a last resort. We will do some numbers crunching a little later.

Avoid Mistakes that Could Make Things Worse

It may take time to get your company back above water and back on solid grounds, but through turbulent times keeping it afloat with minimal bleeding is the main focal point. Being able to think clearly is so important. Crises management requires a clear mind.

You may want to consider business debt restricting over liquidation if you have exhausted all of your other options, trimmed the fat and freed up all of the funds that you could. The fact is that only 1 in 10 businesses will even survive the procedure, and the surviving companies are normally the ones with a substantial amount of funds going into the procedure. Look at your budget first and see what can be thrown out or sold off to free up staff and assets that are not being used. Are your services, operational costs, advertising or inventory bleeding the business? You may have to downsize for a while. Less is sometimes more.


By being able to think big allows you to see things differently to what your competitors see, you have to be prepared to make changes by thick skinned and level headed and let go of staff who are nice people but not productive, in other words are not contributing to your bottom line. Make no mistakes about it, you cannot carry people who are not pull in the same direction no matter how hard they might be trying. Trying will not pay your creditors, it’s the results that will pay your bill and keep the bailiffs away from your door.

I have seen so many people whose hearts ruled and in the end they allowed their business disaster to become their personal disaster and they even lost their family home and even diverse in some cases.

If you believe in yourself and feel you can do it all yourself then, make your mind up and create a strategy that will allow the bleeding to stop and give you time to get more blood that you have lost. If on the other hand you feel it is beyond you then contact a good Turnaround Practitioner to help you stop the bleeding and get you back on the road to recovery.

Moe Nawaz: Author – Speaker – Strategic Advisor & Mentor to FTSE 100 Leaders

    2 replies to "How to stop the bleeding of a failing company"

    • Andy Brock

      So happy to see that you advocate putting insolvency down as the last resort. Like you said, a failing business is not a dying business. Keeping a cool head definitely helps owners from making rash decisions that could make things worse.

      Your suggestions of debt restricting, downsizing and streamlining operating costs are right on par for getting a floundering business back on its feet.

      Great article.

    • Taylor Cavenaugh

      Hi Moe,

      You say “Look for credible sources that you can trust to offer you genuinely helpful advice” in your article. For small town areas where would they turn to get this help?

      Like here in the US would they have to rely on business services like The Small Business Administration, or should they seek help elsewhere?

      Is it possible for small businesses to get the help they need from a specialist like you if they are not local to you?


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