I am saying "hypothetical" because a good friend who is the owner of a home based web company is in kind of a pickle. Here is the scenario:
- No debt (owns a modest house out right), supporting family of 4.
- Recently took on some programmers for a year (appx $2000/mo for a yr - commitment)
- Business is down by literally 50% or more, with no signs of ramping up (has probably netted 35k this year only so far)
- 120k in the bank
- has done no advertising
- $3000/mo or so in residuals
Part of him wants to try and sell the business, though he knows he will get much less from it based upon this years current sales. The other part of him wants to either get a business guy to handle day to day operations, but again, money just isn't coming in like it was. And finally, the other part wants to blast out some advertising dollars.
I am more or less looking for the informed / wise users of this board for advice to give him. Any help/thoughts greatly appreciated!
I'd love to just jump in and give some advice but there's going on here and clearly no simple path out.
Some things to consider / chew over first...
Why is the business declining? Is the market changing? Competition getting tougher? Pricing sensitivity? Your friend needs to understand if it is him or, perhaps, he's just in a business that's going the way of blockbuster.
What sort of market is he in? B2B with a 6 month window to close an account or B2C with immediate purchase opportunities? Two very different paths to get back on track.
What does he want from the business? In an ideal world is it to sell out? To have a small business that pays the bills for the next 5-10 years or more? Grow things into the next eBay? The goal has a major implication on what sort of risk is acceptable to take.
What is his background / understanding of marketing? Campaign experience? Dumping cash to get customers sounds like a good road but if you've never done it before and don't get the methods it's easy to just throw away money versus spend it in a way that had a chance to succeed.
What's the overhead like outside of the 2k / month development cost? Can he make the business go flat so it doesn't lose? Firming up the walls so you're not hemorrhaging can be the first step while making a bigger decision.
What's the requirement from him to keep it at it's current level? Is this 20 hour days or 2 hour days? If you're already at your limits keeping things going it's hard to make a turn versus realizing that "set it and forget it" is no longer working and jumping back in more aggressively.