With crisis comes opportunity: Alternatives to business closure and learning from failure
By ATB Financial 14 July 2020 5 min read
This is the first article in our Life After Business Series. Check out more advice around the financial details and considerations or here to explore some key considerations when closing your doors for good.
How businesses survive and thrive through the crisis isn't solely reliant on what happens next with COVID-19 outbreaks and subsequent lockdowns, but just as much on the vision and tenacity of the Albertan entrepreneur.
While the economic downturn could result in businesses closing their doors for good, it’s worth noting entrepreneurs have options before making the difficult decision to shutter the company.
To pivot effectively requires understanding customer behavior, and being open-minded to ideas such as site renovation or revamping your business model.
It’s also important for business owners to know that failure doesn’t equate to a scarlet letter forever branded on your career or entrepreneurial journey—it could actually be an incredible learning to prepare you for opportunities ahead.
Entrepreneur advice to recovery
These days, business headlines are often layered with seemingly bad news at every turn. Around 90 per cent of businesses in Alberta said they’ve had a significant decrease in revenue, and by March 25 close to half of small businesses across Alberta were at least partially shut down. Also, just under one-third of Alberta businesses were forced to discontinue a product or service.
An April 2020 survey found 63 per cent of business executives said they expect economic conditions to worsen in six months.Only one-quarter believed the situation would improve.
All this negativity can be overwhelming and may even lead entrepreneurs to believe it’s time to wind down their business, avoiding more cash flow problems and heavy debt.
“But slow down first, and take time to evaluate your blueprint for the road head,” advises Jason Bacon, senior manager, entrepreneur education, at ATB.
One option is to pivot your business, he says, but ensure that shift appeals to the market you’re trying to serve.
An example of a pivot gone right is when a Calgary-based beer, wine and spirits producer turned their brew-making facilities into sanitizer-production sites. When a regional health authority called looking for hand sanitizer as the COVID-19 pandemic started unfolding mid-March, it took the executive team of the Minhas Brewing and Distillery less than 48 hours to make the call, avoiding the analysis paralysis trap that befalls many entrepreneurs.
“If you go with it, definitely go with both feet. Because no pivot happens half-heartedly,” says Manjit Minhas, chief executive officer of Minhas Brewing and Distillery. “You have to do it fully, and quickly.If you research too much or take too long to make a decision, others will make the decision for you.”
The company paused its distilling operations in its Canadian and US facilities to focus on hand sanitizer. Within three weeks, the company had produced a million bottles.
Restaurants and cafes also had to pivot with a solid blueprint ahead of them, such as the many venues offering delivery or curbside pickup. Bacon adds that some smart adaptations he’s seen include Lethbridge restaurant Bavaru, among others, adding meal-kit options to customers in order to keep their kitchen operations bustling and the cash flow coming in.
What works for one business may not work for another, so each entrepreneur has to assess their customer base, community, competition and resources before making a decision to serve people in a more nuanced way compared to their pre-pandemic operations.
Getting creative with your space
As the pandemic’s effects continue to ripple across Alberta’s economic sector, entrepreneurs might be wondering if they can add value to their business by applying innovative thinking to their physical space. Some ideas may require resources and capital, so this may not apply to all businesses, but look at how restaurants and cafes reimagined their spaces by adding more patio chairs and tables, in accordance with their municipal guidelines.
That same restaurant could also think outside the box and repurpose an empty room or spare kitchen space to package meal kits for takeout customers, which has become increasingly popular across Alberta.
Such a redesign and repurposing can also help you track revenue and recognize what the ROI may be on the resources you spent on the renovation. For example, the restaurant adding patio seating can determine if customers took advantage of outdoor dining, and make a calculated decision on the next steps. Maybe customers didn’t flock to patio space, at least not yet. And if the tables and chairs got reserved quickly, could there be another way to get creative with other areas within and outside the site?
Failure for small business owners doesn’t mean it’s all over
How do you know it’s time to pack it in for this particular business you’re overseeing? According to a helpful report in Entrepreneur Magazine, the signs you should look out for include being so overwhelmed your work-life balance is out of whack, and realizing the thrill is gone from running the company.
Also, if sales are significantly depressed and customers have left in droves for whatever reason, that could be a signal to hang up the keys. When faced with the reality of having to address closure, many entrepreneurs experience something known as the "sunk cost fallacy" where the business owner feels that because they've put so much time, money and heart into their business, that it just can't fail.
This thinking can often lead entrepreneurs to incur really high interest debt trying to keep the lights on. It’s not easy, but it’s important to acknowledge when something has run its course and will no longer provide you any return.
Bacon offers a useful tip for those confronting a business closure. “We’ve been taught since kindergarten that failure is bad. But it’s not. Fail fast and fail often, just as long as you learn from your mistakes.”
For entrepreneurs, business is personal. After putting you’re all behind it, choosing to close your doors is not an easy decision. But behind every tough decision, is an opportunity to grow and find meaningful opportunities both personally, and in business.