Many entrepreneurs become so invested in their struggle for success that they forget a crucial reality which is business failure. Startups tend to collapse, and only a minor portion of them manage to stay afloat after a few years. But business owners – thanks to their enthusiasm for innovation – ignore the fact that cash-flow can make or break a business. If your business encounters money problems, you’ll find yourself in a financial crunch. That’s when you need to make some tough decisions about your company’s commercial future for protecting your sinking business. Are you considering packing up due to monetary complications? Don’t! Just follow these simple checks and save your brainchild.
Cash-flow leaks you should fix
A failing business is every entrepreneur’s nightmare. Many business owners incline to surrender when faced with the possibility of a near-failure. Though some accept monetary impediments as another challenge to examine the effectiveness of their business strategy. These courageous individuals manage to anticipate when the next iceberg’s coming and save the Titanic with their careful calculations. How to become one of such individuals? Here are some simple tricks that’ll help you avoid sinking:
1. Review your finances
A quarterly review of your company’s cash flow can help you apprehend any financial threat in advance. It’ll also allow you to consider your income, net profit, and expenditures. Reviewing your expenses is probably the single most important technique that may prevent bankruptcy. Moreover, avoid reaching a decision impulsively. The intuition is unreliable; hence trust data-driven decision-making. Craft your budget carefully, and then faithfully stick to it.
2. Curb needless spending
Your marketing department is the lifeblood of the whole organization. Though spending money excessively on advertisements may lead to financial downfall. Failure to arrange promotional campaigns strategically is a money-leaking tactic. If you aren’t marketing to your niche, the money’s just going down the gutter! Also, don’t waste funds designing a custom website without premature marketing research. In short, there’s no need to spend on stuff your company doesn’t need.
3. Try online tools
Modern digital tools help business managers, freelancers, and even homeowners organize their finances effectively. It’s better to purchase cost-effective online accounting software with unlimited support and expert advice. It saves your time so you can focus on other important business matters. These tech tools also make communication and collaboration among colleagues easier. You can share documents and information to enhance productivity and diminish time-wastage.
4. Focus on what’s important
Building on the previous point, spend only on projects that are making your company profitable. When Jobs returned to Apple in 1997, he discontinued the Project Newton that drained $100 million from the company. And that’s just one of the failed products canceled by him besides the Pippin and the Cube. On the other hand, your company must focus only on money-making products/services. Don’t try to bring innovation when the project lacks interest among your target audience.
5. Cut extra costs
Eliminating all discretionary expenditures must be your topmost priority. Reduce anything that seems unnecessary or mere wastage of an almost-bankrupt company’s funds. No more summer holidays or birthday parties! But that’s just an easy decision. The most challenging choice is laying off hardened employees. But, if there’s no alternative available, firing your folks can be a cruel but inevitable policy. Also, consider lowering costs on office supplies or shipping expenditures.
6. Prioritize what to pay
Your payment options vary according to their respective importance. That’s why it’s necessary to prioritize which payment must be issued first and which can be delayed. Pay the vital obligations first, not clearing, which can collapse your business. For instance, paying your employees’ salary is essential because you can’t afford their departure from the company. Paying your vendors and suppliers is your next priority. Similarly, paying taxes should be on the top of your list of expenses.
7. Reshape your fiscal plan
Rethinking your entire cash-flow management can help you avoid bankruptcy and find methods to enhance your productivity. How to perform this action? Try SWOT (strengths, weaknesses, opportunities, and threats) analysis. It’ll provide you information required for strategic planning and identifying undisclosed holes you haven’t plugged in yet. You also discover marketable opportunities – internal/external – which you’ve failed to use for maximizing the company’s profitability.
8. Strengthen your networking
Networking shouldn’t be underestimated! It’s the life-support your company sometimes needs to survive obvious failure. Your connections come to your assistance and bail you out when the ship’s sinking. Your associates help enhance business awareness and finding better clients for your organization. Make friends not just with shareholders but also with your customers. Utilize promotional gifts (pens, purses, or air fresheners) to raise your company’s profile.
9. Your customers do matter
Receive utmost feedback from your customers. Their opinions are important, and you must continue creating products that solve their problems. That’s why you need to collect information from consumers and analyze this data to modify your services. Surveys are beneficial tools for gathering information. Focus on what your consumers want, not what you wish to sell. If your services don’t resonate with the customers’ requirements, you might lose these people to your competitor.
10. Safeguard your assets
Your assets might be your last hope when your company encountered unavoidable collapse. Protect these assets since these are the lifelines you might need to save a failing business. This stuff you own can generate cash flow in the future and improve your organization’s financial situation. For instance, you can sell the machinery owned by the company or rent office space temporarily. These assets can become your much-needed backup for the business.
11. Trust your team
Your employees are your most precious asset. But it’s your responsibility to ensure their correct utilization. Employees who’re working just for the paycheck might not be the right choice for your company. You need to connect with them and ascertain that they understand your business model. Your workers must be dedicated individuals who’ve committed themselves to success. Train them to become more efficient and listen to their recommendations to promote communication.
12. Cherish the risk
Entrepreneurship thrives on risks and challenges. Some business owners prefer playing it safe during a time of crisis. In reality, avoiding risks may diminish your productivity and tamper with your innovative essence. Making brave decisions is often the route to save your failing company. When Private White decided to release branded products, they faced the responsibility of handling inventory and marketing. But this decision ultimately contributed to their growth and popularity.
As an entrepreneur, you might’ve speculated the most dominant reason for business failure. Here’s what the experts agreed upon after a careful investigation. According to the U.S. Bank, 82% of small businesses collapse due to poor cash-flow mismanagement! No wonder there’s an 80% chance that your company’s toast after two decades of service. Moreover, startups crumple since around 80% of them begin with insufficient funds or haven’t created a well-established business strategy. In short, money problems can rupture your smooth-sailing vessel and leave you a veteran of financial bankruptcy. So, avoid financial losses and develop a fiscal awakening. Follow our suggestions and avoid failure.