What I do when a business is failing (the exact sequence)
I have been in this room twice, with the door closing. Both times were before Murphy Door. Both times the business ended. Both times I have gone back over what I did, in order, and I have written down what I would do differently.
What follows is the sequence I actually run now when a business I own, or a business I advise, is in trouble. It is not motivation. It is not mindset. It is a set of steps in order that you can start today.
If you are in it right now, do not read this all the way through and then think about it. Do step one today. Then do step two tomorrow.
Before you touch anything, know what you are looking at
There are two kinds of failing businesses and the playbook is not the same for both.
Cash-flow failing. The business has customers, has revenue, has a market. It is running out of money because operations are inefficient, terms are misaligned, or a bad quarter has stacked on top of a thin balance sheet.
Model failing. The business is not going to make money at any volume. The unit economics do not work. The market has moved. The product is not what it needs to be. More cash will not fix it, it will only delay the ending.
Ninety percent of founders in trouble think they are in the first bucket. Half of them are actually in the second one. You have to be honest about which one you are in before you spend a dollar.
The test is simple. If you had a check for a year of runway right now, no strings, would the business be profitable at the end of that year on the current model? If yes, cash-flow. If no, model.
The rest of this playbook is written for cash-flow failing. If you are model failing, the honest work is different. It is closing the business well, protecting your name on the way out, and starting the next thing when the ground is firm.
The first 7 days: stop the bleed
You are not fixing anything in the first week. You are stopping the bleed.
Day 1: know the number. Sit down with your bookkeeper or your accounting software and answer three questions.
- What is my cash balance today?
- What is my burn rate this month?
- How many weeks of runway is that?
If you do not know the answer to any of those within an hour, that is the reason you are here. You cannot navigate what you cannot see.
Day 2: stop new spend. Every subscription, every recurring vendor, every non-payroll obligation. Freeze new commitments. Not cut, not renegotiate, just freeze. No new spend approvals for anyone on the team without your signature for the next 90 days.
Day 3: call your top three vendors. The ones who are owed the most. Not the loudest. The most. Tell them where you are. Tell them the truth. Ask for 60 days on the current AR balance and offer to pay a small percentage weekly to keep the relationship. Most of them will say yes. Some will not. The ones who do are your partners going forward. The ones who do not, you plan around.
Day 4: freeze hiring. Every open req. Every commitment to bring someone on. Everything.
Day 5: talk to your top three customers. Not to ask for money. To make sure you still have them. Ask how the product is working. Ask if there is anything you should be doing more of. Do not tell them you are in trouble. That is not what this call is. This call is to make sure the top of your revenue pipe is not about to fall out.
Day 6: pick a lawyer. If you do not already have one who does business restructuring, get one. You do not have to hire them for a big engagement. You need a name and a number you can call fast if the walls close in.
Day 7: tell your spouse or partner the whole truth. Not part of it. All of it. This is the hardest part of the whole seven days. Do it anyway. Nobody thrives inside a lie about their own money.
Day 8 to day 30: rebuild the plan
Now you have a week of clean numbers, no new spend, and a small extension on your biggest bills. You have space to think.
Rebuild the P&L. Not the fantasy P&L. The one where nothing new gets sold and every expense is what it actually is today. What is the monthly loss at zero growth? That is your real burn.
Cut what does not touch the customer. Every line item on the P&L falls into one of two buckets. It either touches the customer or it does not. Cut, in this order: office and facilities you do not need, software you do not use, subscriptions that are on autopay, consultants who are not producing deliverables, any layer of management that is not directly making or selling the product.
Do not cut sales. Do not cut the people who make the product. Do not cut the person who answers the phone when customers call. Those three groups keep you alive. Everything else is optional in a crisis.
Talk to your team. By day 20, your team knows something is wrong. You will lose credibility if you pretend it is not. Tell them what you know, what you are doing, and what the next 60 days look like. Do not promise what you cannot deliver. Do not lie. People will run through walls for a founder who tells them the truth. They will leave on a Friday for one who does not.
Cut what you have to cut. If layoffs are on the table, do them once, do them clean, and do them big enough that you do not have to do them again in 60 days. Two rounds of layoffs kills a company faster than one big one.
Day 31 to day 60: rebuild the pipe
Now you have a lean cost base and a real number. Time to rebuild revenue.
Find your last five wins. Look at the last five customers who bought, or the last five deals that closed. What did they have in common? What was the source? What was the story? That pattern is your near-term revenue plan. Do more of it. Not everything. That.
Kill anything that is not in the pattern. Every marketing channel, every sales motion, every product line that is not connected to those last five wins. Off. All resources go to what is working right now.
Renegotiate one contract per week. Pick one recurring vendor per week and renegotiate. Do not skip a week. Do not skip because the vendor was nice last time. This is the phase where you find the twenty percent of your cost base that was priced in a different economy.
Talk to your top ten customers. Not the top three from week one. The top ten. Ask what would make them buy more. Ask what would make them refer someone. Ask what would make them leave. Write it all down. This is your product roadmap for the next 90 days.
Day 61 to day 90: rebuild the trust
At this point you should have stopped the bleed, cut the fat, and rebuilt the pipe. Now the work is rebuilding trust with the people around the business.
With the team. Deliver on what you told them at day 20. If you cannot deliver, tell them why on the day it changes. Do not let a broken promise sit.
With the vendors. Pay down what you promised to pay down. On the schedule you gave them. If a check is going to be late, you call before it is late. Every time. Forever.
With the customers. Deliver on the roadmap. Small wins, on time, that show you are still building.
With yourself. Set a check-in every Friday at the same time. Cash number, burn number, weeks of runway. Not to spiral. To stay honest. The founders who lose companies are the ones who stop looking at the number when the number is ugly.
What I did wrong the first two times
I told nobody. I ran the whole play in my head, alone, until it was too late for the play to work.
I let vendors go quiet instead of calling first. When I finally called, they were already unwilling to talk to me because I had already burned the trust.
I did two rounds of layoffs when I should have done one. The second round broke the team's faith in me. The people who stayed left within six months anyway.
I kept pouring resources into products that were not working because I was too proud to kill them. Every dollar spent on a product that was not selling was a dollar I did not spend saving the one that was.
I never told my wife the whole picture until the day the attorney told me the word "Chapter." I paid for that in every year that followed.
What I would tell you if you called me today
Do the first seven days this week. Not next week. This week.
Do them in order. Do not skip day 7 because it is uncomfortable. Day 7 is the whole point of the first week.
Then, whatever else you do, do not quit your day job until your new business does not notice your paycheck. If this business ends, and it may, start the next one on the side while you have income. That is how you never sit in this room again.
You can rebuild. It will take longer than you want. It will take exactly the amount of time it takes. Get the first 90 days behind you, keep your name clean on the way through, and start again when the ground is firm.
You will build it.
If you are staring at a partnership problem inside the failing business, read Founder Fallout. Ninety percent of the failures I have seen up close had a partnership crack that ran under them. The book is the hundred questions I wish someone had asked me before I signed. Buy it direct on jeremybarker.com at $24.99, or on Amazon in paperback or Kindle.
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