After 125 years in business, Sears is calling it quits and for most of us, this isn't a surprise. For years, they have struggled with staying relevant in a retail environment where Amazon reigns supreme. They began closing retail stores, selling off assets and generally downsizing where they could. The writing was on the wall. But it does pose a very serious discussion about exit strategies and knowing when to close a business versus filing for bankruptcy.
When business is booming, it's hard to think about an exit strategy. It's all you can do to keep up with up with your overflowing task list as you scramble to scale and grow your business. Now imagine that streak continuing for 100 years. You are bound to a get a little comfortable with the status quo and you may even begin to overlook signs that you are losing market share.
So, how does a business owner avoid the same fate as Sears?
1. Do A Sweet Spot Analysis Every Quarter
When business is good, you are on top of the world. But there are always areas that you can improve upon or eliminate from your business plan altogether if they aren't productive. Every quarter sit down with your executive team and perform a sweet spot analysis of your business. Begin by identifying problem areas that need addressing and then brainstorm ways to address those issues.
Next, run your brainstormed list of potential tactics through two filters: the "Low-Hanging Fruit" filter and the "Home Run" filter.
A Low-Hanging Fruit is an easy, straightforward idea that you're almost certain will work. While it may or may not have a big impact, it is simple to implement and you have a very high level of confidence that it will work.
A Home Run, on the other hand, is an opportunity that if you hit it well and all goes just right, has a huge payoff for your business.
Go through each brainstormed idea on the list and ask, "Is this tactic a Low-Hanging Fruit?" If it is, check the box next to it with "LH" for Low-Hanging Fruit.
Then in a second, separate pass, go through your list of brainstormed ideas and ask of each item in turn, "Is this tactic a Home Run?" If it is, mark it with "HR" for Home Run.
What you're looking for are those tactics that are both Low-Hanging Fruit and Home Runs; these are your Sweet Spot ideas, the highest leverage choices to push back your Limiting Factor.
By keeping your finger on the pulse of your business, you should have a better understanding of the health and future of your market moving forward.
Over the last 20 years, Sears began to realize that they were losing market share rapidly and began closing stores and selling off assets in an attempt to stay afloat. While this resulted in a sudden influx in cash, a better method would have been to feed their winners and starve their losers in a more controlled manner.
In your own business you must be able to track performance of each and every dollar you spend, whether it be for marketing, locations, salaries, etc.
Why? Because one of the fastest ways to boost cash flow is to immediately redirect money from your lowest performers to your top 10-20 percent performers. By doing this you will be able to get the most "bang for your buck" for marketing spend, focus on top selling products or grow areas of the company that are successful while others are failing.
Sears lead the way for the current retail environment as we know it, and it is sad to see the iconic brand head to bankruptcy court. But we can all learn a lesson from how the mighty giants have fallen in the past few years, and help safeguard our own businesses from similar fates.