Launching and growing your small business is one of the most exciting, challenging, and rewarding experiences that you can have in your lifetime! But what if, even after several years of operation, you’re not sure if it’s a viable business? This can be one of the most important questions you may need to ask and answer, as it could save you considerable time, stress, and money.
In this overview, you’ll find key insights that’ll help you understand whether your business is viable – financially sound, fulfilling to run, and with an engaged and growing clientele – and strategies to improve viability like changing your business model, pivoting in another direction, or whether it’s simply time to let this venture go.
What is a viable business?
Every small business experiences highs and lows, whether those are financial cycles, periods when your customers are more or less engaged, or times when demand for your products or services fluctuates. As an owner, you may find that your satisfaction and stress levels rise and fall along with these cycles.
The challenge is recognizing whether these are temporary setbacks that can be resolved through problem-solving, a pivot, or a reimagined business model, or if the issues are more serious and lasting.
What questions to assess if your business is viable
A financially viable business is one that generates enough revenue to cover operational costs and reinvest for growth – and when debt or outside investment is taken on, it’s with specific goals such as smoothing seasonal cash flow crunches, building holiday inventory, and adding staff.
Certainly, there may be times – especially during the startup phase – when a business’s expenses will outpace its revenue. However, this isn’t a sustainable model for the long term. For example, if you tap into your personal savings to cover business expenses too often, then there’s likely a bigger problem with the business.
It’s also important to consider the emotional sustainability. If you feel like your business is more of a struggle than a success and you’re having trouble creating an effective work-life balance, then even if your business is profitable, you may not be able to sustain it in the long term.
Here are three key questions to ask and the answers to determine your next steps:
1. Review your business’s financial statements
Is your business financially viable? To determine your business’s viability, work with your accountant or other financial expert to review your financial statements and determine whether your business is financially self-sufficient. This means that most of the time, revenue exceeds expenses, and when that’s not the case, you know the cause, such as seasonality or other fluctuations, and you can identify a long-term solution.
- Yes: That’s a sign that you have a financially viable business – the keys now are to find ways to 1) maintain your revenue and then 2) grow income and profitability for long-term success.
- No: Ask these follow-up questions:
- Are you able to continue to support the business, financially, and for how long?
- What’s the benefit of continuing to pay into the business to sustain it?
- Is there a way to make it financially self-sufficient in the long run?
If you decide to continue the business despite ongoing financial challenges, then be sure to make a plan to revisit these questions in 3-6 months. That will give you sufficient time to see any positive impact of changes you’ve made – or to reduce potential losses, if your business is still struggling with financial viability.
2. Analyze operational sustainability
Is your current business model working for you? For example, do you have to work seven days a week and put in 12-hour days, or are you able to work 40-50 or so hours a week and delegate the rest of the work and responsibilities to your team?
- Yes: That’s another positive sign – the key now is to ensure that, as you move forward, more of your time is spent on growing the business, not managing day-to-day operations.
- No: Ask these follow-up questions:
- How do you feel when you go to or work on your business – excited by the potential, despite current challenges, or drained and stressed?
- Do you have team members who could alleviate some of your work but find that you’re unwilling or unable to train or delegate?
- Are long hours a short-term choice that you’re intentionally making, or because it’s too expensive to hire help?
2. Assess rewards vs. risks of continuing
Do the potential rewards truly outweigh the possible risks? If your business isn’t financially self-sufficient or it impacts your physical and mental health, creating a situation of unsustainability, you should assess the risks of continuing.
- Yes: If your business is financially viable now and the potential rewards outweigh the risks, that’s terrific – keep going! And if it’s not yet financially viable, but you have a plan and a path to get there, and you’re enjoying the challenges along the way, then moving forward is likely a good move.
- No: You may need help determining whether it makes sense to continue to invest your time and resources into your business or whether it would be a relief, financially and emotionally, to bring it to a close.
Many people bring their passions to life by launching small businesses, but the hard truth is that not all will result in viable businesses. This isn’t failure on any level – instead, it’s an opportunity to reconsider where you are and whether it makes sense to change your approach or let go.
Where to find help from small business-development organizations for business viability
Whether the responses to your key questions are mostly positive or not, with this information, you can seek guidance from small business experts, such as your local Small Business Development Center (SBDC) or SCORE. They offer consulting and mentoring services at no cost to small business owners.
They can help you identify challenges and opportunities you may have overlooked or find ways to pivot without draining your financial and emotional resources. They can also help you take the steps needed to wind down your venture, if you determine that’s the best path for you and your business.
If a small business loan is the next step, Pursuit is here
Deciding if your business is viable is a personal choice that considers your financial, physical, and emotional well-being. If signs point to a viable business and if you determine that financing is essential to achieving your goals, Pursuit can help.
We provide loans for small businesses in New York, New Jersey, Pennsylvania, Connecticut, Nevada, Illinois, Washington, and Delaware, with more than 15 loans and a line of credit for businesses at all stages and for a huge range of needs, including working capital, refinancing high-cost debt, equipment, real estate for your business, and more.
Contact us to learn more.