How to Keep Your Struggling Business Alive
Every small business owner sails into rough waters now and then. Rather than go down with the ship, let’s identify where those problems are and what you can do about them.
As I see it, there are 5 big trouble spots most businesses have to learn how to deal with:
- Cash Flow.
- Working Capital.
- Business Insurance.
- Growing Sales.Left unaddressed, any of these issues could bring you down. The good news is, if you are struggling right now, there are many simple fixes that can get you back on the right path pretty quickly. Let’s get to work.
1. Cash Flow
Cash flow is the lifeblood of your business. And if you are short of cash, you run the real risk of going out of business pronto. Fortunately, there are several ways to rejuvenate your cash flow without borrowing money.
While it’s difficult to speed up receipts, it’s often fairly easier to slow down payments to vendors. Even if you have signed contracts with suppliers, go speak with them. Explain that you need more time to satisfy your payables.
No, they won’t be dancing in the streets. But they’ll understand. After all, they know it’s better to work with you and help you stay in business. The alternative (trying to force you to keep terms you can no longer adhere to) won’t do them any good if it forces you out of business.
2. Working Capital sinking
Working capital is really just another way to solve your cash flow challenges. Let’s say you own a thriving pizza parlor. You can’t make those pies fast enough, and your customers are begging you for more. You have a chance to expand your restaurant, but you don’t have the money to do it. Your profit from making and selling pizza is fine, but you haven’t budgeted any money for growth. Your best course of action here is to do two things:
1. Figure out if it really makes sense to invest more in your business. Estimate how much extra money this expansion will bring in. Do a cash flow projection to guesstimate how the cash is going to flow over each of the next 12 months and thereafter.
This will tell you how much you can afford to spend and if the expansion is worth it. Make sure that you go over your projections with an objective friend who has no horse in the race either way.
2. Assuming it makes sense to start borrowing money for expansion, show your pro forma projections to friends, relatives and even happy customers. Offer them a competitive interest rate in return for a loan.
You might also try a peer-to-peer lender. It might be far less expensive and faster to get funded this way rather than through normal bank channels.
If you have a good story and strong numbers, individuals may jump on the chance to invest in you. Peer-to-peer lenders have much greater flexibility than traditional bankers.
The backbone of your business is staff. Without excellent people on your team, your business will fail. Here’s how to keep the standards high:
a. Demonstrate what you want to motivate.
b. Be quick to admit your own mistakes.
c. When mistakes happen, differentiate between honest mistakes made with good intentions and other mistakes made with no intentions (or worse). I have no problem when people I work with make errors – I make them too – as long as they made the mistake in a way that demonstrates real concern for our clients and our business. But if someone is lazy or just doesn’t care, I find that difficult to live with – so I don’t.
d. Be generous with your praise when it’s deserved.
Look for opportunities to call out and reward great behavior. You don’t have to pay an arm and a leg – but you do have to be competitive. But the key to having great staff is investing time in your people.
I have to admit that when I read business insurance policies, my eyes glaze over. It can be very difficult and time-consuming to make sure you get the least expensive insurance.
The solution? Get agents working for you. Go over your policies with your agent at least once a year and make sure they explain them to you. Speak to other agents and let them compete for your business. If nothing else, you’ll get an education and you’ll probably save some money along the way.
This can help you with your business insurance, disability policy or even liability coverage.
5. Increase Sales
No matter how great your ideas are, you need sales. The good news is you can increase sales and business without emptying your bank accounts.
I met with an attorney who was interested in growing her practice. She was just about to hire a man who billed himself out as an internet marketing specialist. The guru wanted to charge my client $1,000 a month for sprucing up her website. I suggested that she use that same money for direct marketing using a pay-per-click campaign. Jane never heard of this option, and her guru never mentioned it either.
The moral of the story? Just because you don’t know how to boost your sales, don’t assume that you have to pay an expert to tell you what to do. Interview other business owners. Ask them what they suggest.
If I’ve learned anything over the last 26 years, I’ve learned that people really enjoy helping others. Tap into that. You’ll get honest ideas that can help you from people who have no interest other than to see you succeed.
This article was written by Neal Frankle and published on Wealth Pilgrim.
Neal Frankle is a Certified Financial Planner™ with more than 25 years of experience.
Wealth Pilgrim is a blog about how to find financial balance in your life. We discuss how to make smarter financial decisions and how to deal with challenges that money can’t always solve.