Zombie businesses aren’t just for Halloween you know. Indeed many entrepreneurs find themselves at the head of a zombie business 365 days of the year.
It’s a term that you have probably come across before; and for an enterprise, it is every bit as gruesome as it sounds. Essentially, a zombie business is one which is little more than a walking corpse, or at least on drastic life support. It needs constant financial assistance and bailouts in order to continue trading, keeping its head above water just enough to save itself from drowning.
One might expect that an entrepreneur in such a position would be fully aware of their Zombie status, but not so: often what is patently obvious to others barely seems to register within the business. Sydney Finkelstein, professor of strategy and leadership recently explained this phenomenon rather well in an article for Forbes. He said that a Zombie business is often “a walking corpse that just doesn’t yet know that it’s dead, because it has created an insulated culture that systematically excludes any information that could contradict its reigning picture of reality. Companies that cultivate these positive qualities to excess become ‘zombie businesses’.”
So, from an insider perspective, how can you determine whether or not your business is a zombie? Usefully, the folks over at FRP Advisory have created a little tool which assesses certain vital statistics from your business to deliver a diagnosis of zombie / non-zombie status.
Being a Zombie business is an untenable and completely pointless situation, but crucially it’s not a hopeless one. There is much that can be done to push your business towards recovery again, and the Zombie diagnostic tool will point you in the right direction should you need some further information.
The major reason why operating a zombie business is completely futile is glaringly obvious; eventually the whole thing is going to come crashing down around you. But on a day-to-day operational basis, one can see the massive detrimental impact that such an existence can have, with each passing day making it more and more difficult to return to prosperity.
Here are examples of the constant damage that can be done to your business as a result of unwillingness to identify or deal with its Zombie status.
Inability to plan for the long term
With critical cash-flow problems, long-term planning and meaningful business development become almost impossible. Your attention is so pre-occupied with simply surviving from one day to the next that strategising for the future is a luxury that you can ill afford.
Failure to address the route of the problem means that it will develop into something of a vicious cycle, preventing you from making any positive headway in the long-term.
Inability to guarantee staff long-term / full-time contracts
This is as much a problem for you as an employer as it is for your employees. Uncertainty about the sustainability of their positions breeds an anxiety within your team and often a desire to pursue employment with a less tenuous business. The result of this might be the loss of talented people from your team, further compounding the already momentous problems you face.
Unable take advantage of ‘economy of scale’ model
Having ‘cash-flow problems’ is one of the most difficult situations for a business to find itself in, but within a zombie business, the issue has reached a critical point. As you know, money is the life-blood of any business, and without access to sufficient funds you are immediately at a disadvantage to your competitors, not least when it comes to purchasing power.
Limited in the scale of contracts which can be undertaken
If unaddressed, poor cash-flow can leave you unable to agree to larger value contracts because you simply can't afford to expose your business to a situation which might see delayed payments. This has an obvious detrimental impact on your ability to rectify the situation, and reaffirms the need to take active steps to address your Zombie existence.
Additional stress for management / employees, and low team morale
As a long-term strategy, simply surviving from one-day to the next can often foster a negative atmosphere amongst your team. The lack of tangible ‘success’ can be damaging to self esteem, and over a long period of time can instil a sense of worthlessness, or a culture where merely ‘surviving’ is deemed acceptable. Additionally the stresses which come alongside working within a Zombie business can lead to significant and damaging frustration amongst staff.
Lack of funds to make positive business changes
In a similar way to the vicious cycle created by surviving from one day to the next, not having the funds available to make meaningful and positive changes within the business can hold back progress within a number of areas. Often the management and / or team are aware of the changes that need to be made, but are simply unable to implement them, making a bad situation even more toxic for all involved.
Although we have painted a pretty dire picture here, we must reiterate once again, that even if you find yourself running a zombie business, the chances are that the situation might still be salvaged. It is certainly a complex issue, but sitting on your hands and ignoring the problem in favour of surviving on a day-to-day basis will only serve to compound the issue further.
The first step to recovery is identifying if your business should be classified as a ‘zombie’, check out the zombie diagnostic tool which should give you a fair idea of what you’re dealing with!