Richard Branson on How to Turn a Business Around
Editor’s Note: Entrepreneur Richard Branson regularly shares his business experience and advice with readers. Ask him a question and your query might be the inspiration for a future column.
Q: I just bought a well-established, well-known brand in Ireland. Though the company has been around for 40 years, for various reasons it is no longer making a profit and turnover has collapsed. However, in my opinion the brand still has value.
How can I capitalize on this while I’m trying to increase turnover in order to pay the creditors? — Anna Keely, Dublin
The appeal of taking over a company is that it already has an established customer base, and the new owners usually see opportunities for innovation and expansion. In your situation, Anna, you’ll need to look at the reasons the business faltered, and decide what its assets are in addition to the brand name and whether you can salvage them.
Here are four common problems entrepreneurs and managers encounter at established companies, and how to start turning things around:
1. THE COMPANY OFFERS A BRAND NAME RATHER THAN VALUE
A business’s long history is meaningless if it doesn’t provide the best-designed, most reliable products or services at competitive prices and back up those offerings with the finest customer service. In these fast-moving times, longevity is more the exception than the rule. According to a 2012 study by Richard N. Foster of Yale University, the average life span of a company listed in the Standard & Poor’s 500 index has decreased to just 18 years, from 61 years in 1958.
The process of starting a business has become much faster in that time, but the mechanisms of failure operate more quickly as well. Through social media, you can inexpensively spread the good word about your new company’s products and services. And yet those same channels will spread news about consumers’ bad experiences even more quickly.
To get a sense of how your customers understand the brand, first try buying your business’s products and services yourself. Buy them in a shop, try them out at home, call in with a complaint, and see how you’re treated. Did you get value for your money? The experiment may show you many areas for improvement.
2. MANAGERS HAVE BECOME COMPLACENT
Very few products are so good that they cannot be continually improved upon. In Britain we have the expression “like painting the Forth Bridge,” which refers to an unending task. This is because the painters of this long bridge in Edinburgh were never done -once they’d finished painting it, they had to immediately start over again. (The task came to an end in 2011, because workers had switched to a different kind of paint.) Product development should be a similarly endless quest for improvement.
This process is sometimes neglected or even abandoned at an established company. When you take a new position at such an enterprise, you should ask yourself and your team, does the company’s offering need a makeover? What are the opportunities for improvement?
In your position, Anna, I would look at how your product or service stacks up against your competitors’. The answers may help you to pinpoint changes that are needed immediately.
3. EMPLOYEES HAVE BECOME BORED
If the previous owners of the business lost their way, it’s possible their employees did too. And at a company that has been around a long time, keeping them motivated and engaged can be a big challenge, since they may have been doing the same jobs for many years.
Sloppy, lackluster delivery can quickly destroy even the best products and services — look at what happened at many phone service providers and airlines in the past 20 years.
Talk with your employees: How do they get along with their colleagues and your customers? What motivates them to go to work in the morning? Listen carefully to their answers. Those whose primary concern is “paying the bills” may need your help finding new inspiration.
4. NOSTALGIA BLOCKS INNOVATION
Just because a brand has been around for decades doesn’t mean that it’s right for today’s marketplace. If your brand has been tarnished by years of mediocrity, or is seen by potential customers as something only their grandparents would use, then a rebranding may be in order.
Ask your staff and customers what they like and don’t like about the operation today. While the company’s past is an asset, you need to focus on what can be accomplished in the present — just like your creditors.
Anna, whatever changes you decide to make, remember that a business’s best assets are its people, and you should keep them on if at all possible. Hang in there and keep sight of what inspired you to buy the company, and I am sure you will turn the company around.
Entrepreneurs: If you have ever taken over an established brand, what were the obstacles you encountered? What’s your advice for Anna?