Are you struggling to keep your organisation afloat? If so, you’re not alone!
Turning an excellent idea into a lucrative business venture can be challenging and risky. This is especially true for small business sectors. While many are champions today, some entrepreneurs may find themselves nearing the point of failure eventually. In fact, around 20% of startup companies are bound to dissolve within the first year of operation, and only 30% are likely to survive by the end of the decade – as shown in a recent article from Entrepreneur.
Then again, don’t be discouraged by such facts and figures. Some businesses can experience a state of financial distress as a result of incompetent management, insufficient cash flow, or minor glitches that can delay the progress. Whatever the reason may be, your sinking company might just need someone who will stand up and make big decisions to change its course.
No one knows and understands your business the way you do, so if there’s one person who can take immediate steps to help recover your position – it’s you! With optimism and a series of conclusive actions, you can restore your business and perhaps even make it thrive and become hugely successful in the future. To get you started, here are some genius ways that will help you bring your business back on track.
Identify the Problem
Before you come up with smart solutions, you need to understand the main source of the issue. This will help you decide whether your business is worth saving or not. It’s wise to start with a thorough review of all records showing the company’s assets, debts, and liabilities. Compare your resources with your expenses – the combined sum of debts and liabilities should not be greater than the total value of your assets. Otherwise, it could be an implication of poor cash flow, causing an abrupt downturn to your business.
Aside from cash flow problems, insolvency can also result from a host of other underlying issues, such as:
- Starting a business without identifying your target market or understanding your customer (particularly their demands and behaviour);
- Developing an unsystematic pricing strategy (for example, setting prices either too high or too low);
- Failing to keep up with marketing trends, changing technology, and new ideas;
- Incompetent management and team members (which may result in the loss of key employees);
- Poor conditions in the overall economy due to labour shortages, climate change, or pandemic;
- Unforeseen natural disasters (storms, floods, and fires) and criminal activities (theft, fraud, and cyber-hacking).
Find Ways to Cut Nonessential Costs
Eliminating unnecessary expenses is an effective way to help your business occupy a better position. Many small companies can experience common cash flow difficulties due to excessive spending. Expenditures ranging from office rental fees and salaries to equipment overhaul and other operating costs can quickly add up. Fortunately, there are numerous options to consider if you want to lower your expenses and generate a healthy cash flow.
- Renegotiate contracts with your landlords, suppliers, banks, creditors, and other third parties;
- Consider outsourcing roles associated with payroll, accounting, marketing, logistics, customer services, and other administrative tasks;
- Maximise your employees’ skills and learning capacity by giving each individual a variety of tasks – allowing them to excel and develop a sense of fulfilment at work;
- Reduce your utility costs by switching to more economical internet/mobile services, business insurance policies, and office supply providers;
- Avoid leasing equipment that your company no longer uses;
- Optimise resources by capitalising on leftover materials or recycling them to create new products.
Cutting down on these expenses can help to provide your company with sufficient cash reserves, which you can use to cover business loans and other maintenance/emergency costs. Perhaps most importantly, even the smallest reduction in your daily expenses can have a tremendous impact on the company’s overall cash flow and profitability.
Explore Funding Options
Suppose your company has a relatively insignificant amount of debt. In that case, you can consider applying for small business loans to prioritise your critical obligations (such as property taxes and bank loans that are overdue) and other operating expenses (such as payroll, rent, and utilities).
However, if your business debts are getting out of control, then it might be best to take advantage of alternative funding solutions like government grants and subsidies for struggling small businesses, crowdfunding platforms, or venture capitalists.
Recover Outstanding Debts From Your Debtors
Part of developing a solid relationship with new clients is allowing them to make late payment arrangements. However, outstanding debts that remain unpaid for a significant period of time can potentially result in serious cash flow problems.
Collecting overdue payments may take a lot of time and effort, but there are some straightforward ways to deal with this sticky situation. First, you need to follow up on your debtors by sending out recurring invoices to gently remind them that it’s time to settle their payments. If the clients fail to do so, you may wish to hand over the account to a debt collections agency that can help recover the outstanding debt. If none of these methods work and you’re unable to resolve things, then legal action may be necessary.
In the future, try to set up a mutually beneficial payment plan that both parties can agree upon. This way helps you to maintain good relations with your customers while also avoiding the hassle of pursuing legal action. You can also provide your clients with early payment discounts to encourage them to pay in full as soon as possible.
Reorganise Your Business
Lack of harmony within the team affects more than just your company’s productivity, employee morale, and overall profits. It might also cast a shadow on your reputation as a business owner, which can undermine all the hard work you’ve put into building customer trust and loyalty.
Hence, one of the best ways to recover when your company faces a bump in the road is to take the time to view your organisation from a different perspective. Look for areas that might need some essential upgrades. Consider the quality of your services, customer feedback, finances, and workflow, as well as your management style. If you start to notice detrimental patterns, then maybe it’s about time to execute your Plan B, which focuses on new business goals and strategies that will effectively run for a long-term period. When your business structure is optimised and clarified, it will be easier for team members to operate with success on a day-to-day basis, leaving you with more time to focus on increasing your profits.
The Bottom Line
With all the tips we’ve shared in this guide, you can start taking immediate actions to help save your business and make a successful comeback very soon! Remember, having a positive attitude amidst all the chaos is the key to making smarter decisions and achieving effective resolutions. Thus, don’t forget to keep your chin up and learn from the tough times to prevent them from happening again in the future.