These days, when we admit a business is going through tough times, it simply means it is experiencing cash-flow problems. There is some evidence to suggest that many business owners often meet very serious cash-flow issues in their businesses. These issues in some cases do threaten the real survival of these businesses. When times are tough for any business, it takes real struggle to keep the business afloat. That is when the managerial capabilities of the business owner get tested to the fullest. Below are seven tips which can help your business stay afloat when funding is tight and times are tough.
01. Cut back on your working capital. When times are tough, the most logical thing to do is to embark on cost-cutting here and there. You can cut your working capital if you freeze increases in your inventory. That is because inventory usually ties up cash which you need freed up for use elsewhere in your business. In addition to reducing your inventory, you can also be more diligent in collecting your debts. That helps to improve your cash-inflow.
02. Suspend spending on capital items. In many businesses, spending on capital items is always a long-term investment. When the times are tough, it is simply prudent to suspend spending on capital items altogether. That frees up your much-needed cash for other vital areas of the business. When your business is struggling to pay salaries and meet other essential overheads, embarking on capital spending is not a very smart thing to do.
03. Closely watch your expenses. In very difficult times, it makes economic sense to cut operating expenses. Keeping a close watch on these expenses enables you to know what to cut and what to keep. Whatever you cut, but sure they do not completely cripple your business. Keeping your business alive through reduced operations is clearly better than allowing it to go under if you fail to act prudently.
04. Keep a tight control on your inventory. Be sure you have very good and up-to-date records of your inventory. That is one vital way to avoid undue leakages through losses and thefts which your business can least afford. Use due diligence at verifying all claims from your creditors and pay only for items your business actually needs on the short run.
05. Renegotiate your main concessions. When times are tough for your business, you can ask for new business concessions or you renegotiate better terms on your existing concessions. For example, you can ask for waivers on interest charges, fees, rates which your business has already been assessed on or you ask for extended terms to pay. These actions can give you temporary respite when you have cash-flow problems. Going bankrupt is neither in your interest nor in the interest of your creditors. That is why your creditors need real flexibility to help keep you in business through tough times.
06. Explore every way to grow your sales. One of the most sensible reactions to a cash-flow squeeze is to grow sales. That is because getting more cash-inflows into the business is what makes real sense in tough times. To sell more, it is good to explore ways to produce on order if the customer is paying cash in advance. What your business needs in tough times is real cash and if your sales bring in cash when you supply or before you supply, that is better on the short run for the business.
07. Explore viable ways to refinance the business. In tough times, be ready to negotiate any and everything which can help your business to ride out the storm. For instance, if you can negotiate and restructure your debts, it is capable of lowering what you pay out regularly to service the debts. Refinancing usually frees up some cash for you to use elsewhere in the business.
From the foregoing, it is clear that when your business faces tough times, it is best to focus all your managerial decisions on limiting cash-outflow from your business and increasing cash-inflows. That is how best you can quickly ride out the tough times. These 7 tips come in very handy in that quest.
Sule Yesufu, a Certified Speaking Professional, has been a Strategic Partner in S D Y Management Consult, a firm of Investment, Small Business and Entrepreneurial Consultants since 1999. He is a Published Author and a Newspaper Columnist. An expert in Small Business and Personal Development, he focuses on communicating his ideas and thoughts mostly through his Training Seminars and popular free blog. He offers useful tips on Self-Improvement, Personal Finance, Entrepreneurship, Current News, Politics and Business in Nigeria, the most populous and vibrant country in Africa.