There is no magical money tree that provides unlimited finances. If there was, business would be a whole lot easier. In reality, the lack of money is the downfall for many businesses. When cash flow is skewed and there’s not enough revenue being generated, this will lead to companies descending into debt.
The debt hole is one that many will fall down and fail to escape from. The result: their business disappears forever.
There are plenty of statistics which back this up. It is said that 50% of small businesses will fold within five years of opening. The main reasons for this include:
- Insufficient startup capital
- Inadequate financial planning
- Poor management
- Cash flow issues
While the position is difficult to come back from, it’s not impossible. As the following guide will demonstrate, you can deal with the debt and keep your business afloat in the process.
Look at the numbers
When it comes to a starting point for solving your debt quandary, you should always begin by having a general overview of the situation.
If you focus on the numbers, you can gain a deep insight into your current problems. By viewing the revenue and expenses of your business with a magnifying glass, you can truly understand why your debt has cropped up over time.
With this type of information, you can begin to plan for the future. You may craft a budget that will steer you out of trouble. You will understand how many sales are required to start producing a suitable profit. You can also figure out what type of costs your business can eliminate – more on that in the next section.
As with any budget plan, one of the main focuses should be on your costs. If you can cut away unnecessary expenses, you will typically save a significant amount of money – the type that can go towards wiping out your debt.
Fortunately, there are various different options available when it comes to making budget cuts. Here are a few to consider:
- Relocate the business: It might not be cost-effective in the beginning but relocating to a cheaper location can seriously pay off in the long run. Plus if you truly want to save money, consider abandoning the office space altogether and create a remote team.
- Utilize technology: If you select the right technology, you can reduce the need for you and your employees to spend on certain tasks. For instance, you wouldn’t necessarily need someone managing the books if you use specialist accounting software that automates the process.
- Freelancers instead of employees: In-house employees are expensive. Along with their regular wage, you have to consider aspects such as benefits and taxes. This isn’t the case when hiring a freelancer. You can simply pick to pay a set fee for each task/project, and there’s no need to retain a freelancer or agency.
- Go paperless: Paper, mailing supplies, postage, ink – these are costs which will seem minimal on the surface. Yet they can quickly add up to being a significant expense for your business. If you go paperless, you can effectively eliminate these types of payments.
Just remember: don’t go overboard when reducing your outlays. You never want to remove so much that it negatively impacts the overall quality of your business. Your products and services need to maintain their standards – otherwise you’ll also lose something else: your customers.
Improve your marketing
Now when the previous point talks about reducing costs, you might be wondering how it’s feasible to improve your marketing. However, you don’t have to throw money at promoting your business. This can be done with a very limited budget – you just have to be savvy and strategic about it.
For instance, you can utilize social media to promote your business. It’s free to sign up on the likes of Facebook and Twitter, and you can build a healthy following and reach with a regular flow of shareable content. Even something as simple as offering a coupon code can be an effective marketing approach.
When you boost your advertising efforts, you will naturally increase your sales numbers – the ideal tonic to any debt issues.
Contact your customers
Your current customer base is what’s keeping your business alive at this point. Yet this same customer base can be used to grow your company to a new level.
First of all, you can increase sales numbers by specifically targeting your current customers. If you supply them with exclusive deals, they are likely to bite. After all, they’re a customer for a reason – they already enjoy what you’re offering, and they will do so even more if they receive a discounted price.
You can also contact customers as a form of market research. Ask them for feedback on what they like and dislike about your business, what they’d like to see from a new product range, and so on. This type of research can help guide your business towards a prosperous future.
Get in touch with creditors
If you contact your creditors and explain your current predicament, they might be willing to negotiate more favorable repay terms. This can help keep away the potential of facing a debt lawsuit.
Although no matter how much you try, creditors can decide to hit you with a lawsuit. They might feel this is the only way to get you to pay the debt. Before you do, however, analyze the options available. You can acquire professional legal help with pay off when dealing with a debt lawsuit. Their expertise
If your debt has consumed the business and there’s seemingly no solution, there is one way of getting out of the problem: sell the company. If you sell the business, you can instantly pay off your creditors and get away from the situation.
At least, that’s if you can find a buyer. If your business is in the unfortunate position of having larger debts than assets, this won’t look enticing to buyers.