Posts

Is Your Business Sinking? 12 Holes You Need To Plug

StrategyDriven Managing Your Finances Article |Failing Business|Is Your Business Sinking? 12 Holes You Need To PlugMany 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.

Conclusion

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.

Industry Insights: What are the Top 4 Obstacles That Prevent Business Growth?

StrategyDriven Entrepreneurship Article |Business Growth|Industry Insights: What are the Top 4 Obstacles That Prevent Business Growth?You can never stand still in business or you risk being left behind by your competitors, but there can often be some obstacles that are blocking your path to future prosperity, all of which are often negotiable if you know how to get around them.

Being able to get what your business needs in terms of new equipment is just one challenge that you have to find a way to face up to and if you can learn from others that have been there before you it could give you the vision to succeed.

Here are some pointers on how to clear some common hurdles that might be stunting your business growth.

Coping with change

As your business evolves and attempts to grow it will become abundantly clear that you can’t always rely on the same format that has got you to this point so far.

Businesses tend to become more complex as they grow and that means you will have to implement strategies that deal with challenges such as communication problems when there are more people in your team.

Innovation can be harder to implement when you have a rigid system that hasn’t changed from how it used to be in the beginning and this is why you need to consider ways to pull everyone in the same direction if you want to enjoy a smoother path to growth.

Not keeping an eye on cash flow

A growing business is always going to be hungry for cash and if you don’t plan for the financial strain that you might be under as the company expands it could easily derail your plans in a very short space of time.

Cash flow issues are a primary cause of business failure and it doesn’t have to be a lack of turnover that causes your cash crisis, as growth spurts are equally challenging to your survival if you don’t manage them properly.

Make sure you have an accurate cash flow forecasting system and use it to predict exactly how much cash you will need at any time to fund your growth.

When you need more equipment

Whether you are running a manufacturing business or operating in the service industry it is likely that you will need to acquire more equipment in order to cope with increasing demand and a growing payroll.

Look at efficient ways to get your hands on these new items and to upgrade your old stock. This could be achieved by browsing auction sites to see if you get the equipment you need for less, and sell what you no longer need.

You might also want to look at arrange equipment finance to help fund your growth plans.

When you fail to plan, you plan to fail

There is a lot of truth in this old business adage and the bottom line is that you can’t expect to overcome any obstacles in your way if you don’t create a viable business plan that shows you how to navigate your way through these stormy waters.

If you set some realistic goals and produce a credible blueprint for success you should find that your path to achieving business growth has a few fewer bumps in the road.

Golden Rules for Maintaining a Healthy Cash Flow

StrategyDriven Entrepreneurship Article
Photo courtesy of Nicholas Youngson of NYPhotographic (Title CC BY-SA 3.0 NY)

You have, no doubt, heard the saying ‘cash is king,’ and it may be cliché, but it is definitely the truth. No business can survive without any cash. It is the fuel that keeps the engine running. This is why all companies, especially SMEs, need to have a strategy in place for maintaining a healthy cash flow and dealing with any potential related problems that may arise.

Have a clear process in place…

Businesses run efficiently when they have clear procedures in place, and this is definitely the case when it comes to maintaining a healthy cash flow. You need to have a straightforward procedure for dealing with invoices and collecting payments. Don’t forget to practice what you preach; you need to send out invoices promptly if you are to be paid on time. How can you demand efficiency if you are not operating efficiently yourself? There are plenty of great tools available today to assist with sending invoices out and tracking them. By automating this part of your business, you can ensure everything runs more smoothly and quickly.

Don’t accept defeat…

One of the worst things you can do is simply assume that there is nothing you can do about late payments. Many business owners assume that it is out of their hands. After all, they cannot literally force the client to pay on time. You need to get rid of this defeatist attitude. No matter what frustrating business problem you are faced with, there is always a solution. Of course, you can improve your internal practices, but if this does not solve anything, there are other options. Working with a cash flow finance company is highly recommended. If you get an indication that a client is not going to pay on time, a finance firm will pay on their behalf. The client will then pay the lender instead.

Do your research beforehand…

It pays to do a bit of research about the customer beforehand. This is especially the case for any substantial orders. Begin by acquiring their credit report. This will give you a good indication as to whether the potential client is someone to trust. If they do not make payments on time, they will have a bad score, and this should be an immediate red flag. You should also find out about the payment practices of the customer. For example, do they pay on an ad-hoc basis? Do they only pay on a certain day per month? By knowing a customer’s payment habits, you can plan more efficiently. The more you know, the stronger your position.

Set an upper limit per customer…

Finally, make sure you set a bespoke upper credit limit for each of your customers. You can use the credit check you obtained to assist you with this. Also, obtain references from other businesses that have traded with them. You need to determine the risk you are exposing your firm to when arranging any type of credit agreement. Once you have set the limit, do not budge.