Is your business on life support? Are you struggling to make it work? Before you decide to pull the plug and either sell or close up shop (which sometimes is the best and only option), you should at least consider taking a few steps to see if you can save it.
A troubled business needs to take a brutally honest and close look at both cash flow and expenditures. You need to increase the money coming in, and reduce the amount going out. Simple idea (but as is usually the case, easier said than done).
Examine Cash Flow
Where is the money coming from? Identify all your sources of revenue (retail, wholesale, resellers, and so forth). Make a list and track the average amount coming in from each one. You then need to explore ways to boost each source.
Do you offer credit and deferred payment options for clients and resellers? If yes, and short of removing that option completely (which could cost for a few big accounts), see if you could offer some kind of incentive for accounts paying up-front. Discounts, priority shipping, or first-look agreements are all great ways to motivate your buyers to pay for everything now rather than later.
Is your marketing working for you? Do you have reliable data about where and how your customers are finding you? You should. Use that to see which channel is funneling the most new leads to you, and then up the ante on that one. You want and need to increase your cash flow.
Aside from increasing revenue, you need to cut costs (which has the same overall effect...more money in your bank account). There are many ways you could do this, and you should explore them all.
- Examine all costs, even the little ones. Can you cut back on added services with your phone lines (call-waiting, call answer, conference or multiple lines)? Could you downgrade to a lower speed or bandwidth from your internet provider?
- Adopt an aggressive “green” policy when it comes to electricity and heating/air-conditioning. Utilities can eat a huge chunk of your monthly budget.
- Could you move to a smaller (i.e. cheaper) office or retail space? Many businesses are reluctant to do this, but it beats the alternative of closing forever.
- Can you reduce or eliminate free bagels and coffee for employees (or something similar)? Again, this might not be ideal for morale, and some employees may get angry, but it’s better than going bankrupt and everyone losing their job. Lose the bagels, or lose your paycheck? That’s a no-brainer.
Government Grant or Assistance Programs
Many local, state/provincial, and federal governments around the world offer various grant programs for small businesses. They stimulate the economy and provide jobs, so it’s in the best interests of government to support them - financially and otherwise - in any way they can. Check to see what is available to you. A cash injection may be just the thing to get you back on course.
Eliminate Debt as Quickly as Possible
Debt is a part of owning and running a business. When your business is struggling and the debt is piling up, do everything you can get reduce and eliminate it as fast as possible. If you simply can’t pay everything at once, pay off the higher interest debt first, working down to the lowest interest rate last. Not ideal (paying any interest when you’re in financial trouble is not good), but it will buy you some time.
You should also consider delaying payment on accounts that provide that option. When you receive an invoice or bill, you are often given a timeframe for payment. If you have 60 days to pay, it might be worthwhile to take the full 60 days. You can use that money to pay off something else - something due immediately or with higher interest - and work aggressively to earn more during the two months before that bill becomes due.
A Word on Your Employees
Layoffs are an unfortunate reality. They happen. But don’t be so quick to use them. Be honest with your employees about the situation. They can help. Reducing hours, cutting benefits, and extending payment periods (from bi-weekly to monthly, for example) are all more attractive than losing your job. Your employees want you and the business to succeed. It’s their livelihood, too. Most of them will be willing to make some sacrifices to help out. Just talk to them.
Be honest with creditors and suppliers, too. If the situations gets very bad, many will consider working out a delayed or reduced payment plan if the alternative is losing out on everything if your business declares bankruptcy. Not ideal by any stretch, but better than nothing for them and you.
Financial difficulties can happen to anyone at anytime. But it doesn’t automatically mean the end of your business and everything you’ve worked so hard to build. It does mean reevaluating your business revenue and costs. It does mean honest (and possibly awkward) conversations with your employees and creditors. But it can be done. You can survive...and the business that emerges on the other side is stronger and healthier for it.