How To Save Your Business’s Finances Without Loans.
There are times when the once flourishing business, starts to fall. In times such as this, you find the business trying to take so many drastic actions to save it from falling apart which could range from firing of staff, reduction of salaries, borrowing of loans and in most cases shutting down the business totally. Research shows that, 60% of businesses facing financial crisis end up folding or being bought over. But is that the best way to handle this? No it isn’t.
To prevent a business’s financial crisis from pulling it down, seems to be a herculean task for many business owners who most times prefer the easy way out; a buy-out or business shut down. Most times when the ‘easy way out’ strategy is applied and maybe the business taken or bought over by some other person, at a later time, the previous owner(s) begin to regret when that business is flourishing again. And in such cases the method to bail out that business might have been a very easy task.
There are strategies to follow that can actually save a business’s finances without sourcing for loans:
1. Sale or Lease of Unused Assets: every once in a while, there are equipment, facilities and other properties in a business that is either old, damaged or maybe unused in the sense that, they may not be readily needed at that point in time. Instead of letting such assets become liabilities by incurring extra space, eating more of the business’s money in terms of maintenance or in the case of the unused and maybe new equipment get damaged, it would be wise to either sell or put it up for hire. Definitely the proceeds gotten from this strategy can go a long way in saving the business’s finances and in some cases be a source of capital for an expanding business. So put up that machine for hire, why did I say hire? You see, overtime, the cost of properties tend to go up, so imagine selling that equipment for $1500 say in the year 2015, that cost you $1950 that same year and later in the year 2017, you decide to buy that same property (of course a new one) and you get to hear that the cost of that property has gone up to $2300 if not more, this will be a heavy blow on your head. Another reason I chose hire is this, when you get your property hired, you stand the chance to gain not just the cost of getting that property, you stand to gain more than that and the property remains yours after the expiration of the agreed terms of contract.
2. Expenses Shouldn’t Exceed Income: the economist will say there should be balance of payment surplus; which means your income should be more than your expenses. If your business has a rather staggering outcome of having more expenses than income, then it is time for you to really look at the charts and see what you are doing wrong. If the expenses are not capital oriented; that is to say the expenses isn’t for the expansion of that business or another business, then such expenses should be jettisoned. Most business owners seem to spend every dime gotten from that business without considering the ripple effect of such actions on that business.
3. Who is Managing Your Business Finances?: the six basic functions of management include forecasting, planning, organizing, commanding, coordinating and controlling of the affairs of every business. If the finances of a business or company seems to be falling, the financial manager or anyone at the helm of the financial affairs of that company or business is usually held responsible, because he is in charge of the tracking monetary expenses and income of that business. If your financial manager has no experience or lacks proper training on the management of financial matters, your business is bound to nose dive.
4. Increase Business Input: input here may or may not necessarily mean monetary input, say closing time is actually 4pm, the input you can provide here is to shift your closing hours to a later time like 6pm. With this you will have extra time to provide or increase your output which means more sales, more money.
5. Downsize Your Workforce: this can be brutal or harsh. But the best way to do this is to actually first pay the wages or salary, hold a meeting with the business employees, explain to them the situation on ground and throw an open ‘exit the business’ or ‘who wants to leave the business’ call. Unless you are ruthless and think you can understand the emotional pains they will pass through, you can fire them yourself. But to make sure you step on nobody’s toes, do not discharge them yourself.
6. Reduce or Put A Temporary Halt To Credit Facilities: it is believed that for every business to achieve a more returns on investment as well as to get more clients, credit facilities should be made available to its clients. But in the case of a falling business, it is advisable to reduce or if possible put a halt to the provisions of credit facilities to its clients. Also, if there are persons or legal bodies that are owing the business, this is a perfect time to collect. The money generated from this strategy, can help the business stand up again.
7. Sell Some of Your Existing Shares: a business that is a legal entity and has met all requirements for its existence, can put up some of its shares for sale and if possible, there should be a clause for a buy back at a later time, unless of course there are no plans for that. Buy-back clause will certainly help the previous owner of the business to get back his shares at a later date.
8. Consult Experts: every business has an expert or professional who has been through what you are currently undergoing, they are in a better position to guide you especially from their personal experience as this would surely go a long way to help you succeed. They will never advice you to get a loan because you are borrowing to solve debt issues which is a killing spirit to businesses. Meeting up financial advisers who understand “cash flow”, can actually help you gain more grounds. Financial advisers in the US, are said to have saved 45% of small and medium businesses within the last decade. So getting advises from financial experts and business consultants or business coaches will surely stabilize your business.
The importance of saving a business, should not be over as well as under emphasized. Most businesses choose the easy way out and later will begin to regret their actions. Businesses are like tidal waves that go up and down and of course, there are a thousand ways to save that business.
Save that business, don’t let it slide.
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