Everyone is in love with the small business that they have started, and usually all they want is for it to flourish and grow. But the harsh reality is that every business can go through some sort of financial difficulty.
One of the biggest crises for a business is in the area of finance. We know that generally, it takes 4 years for a company to break even. This means that for the first four years of being in business, you are going to have some tough financial decisions to make and some significant losses you may have to bear. This the normal cost of doing business, and most small businesses have a contingency plan to tide them over those crucial four years.
The key is to avoid financial disaster.
Here are some areas to consider when you’re planning to avoid a financial crisis.
- Take control This is important – because if you do not take control of your business, it is likely that your business will go under in few years. You can take control of your business future by ensuring that management and accounting systems are active and in place. Get professional help if you do not think you are competent to analyze and interpret financial data. Also, remember to set long term and short term goals, and to tweak your business plan as necessary.
- Decision-making Make sure that you do not delude yourself where decision-making is concerned. Be honest with yourself and the data – and accept the harsh realities of the business world and make your decisions accordingly. It helps if you have a trusted 3rd party, such as a partner or close family member, to bounce your assessments off of.
- Understand your cash situation You need to be in constant control of your cash flow. Be stringent where necessary and do not make extravagant purchases until you have reached the break-even point.
- Payments and receipts make sure that your payments are always made on time. More importantly, make sure your creditors provide receipts on time. You need to collect the money people owe you in a timely fashion. Any delays in collecting money due will result in delayed payments – which of course is bad for your business.
- Communicate You need to maintain healthy relationships with all those involved in your business, whether they are customers, investors or employees. Having open communication is the best policy.
- Be open to change You may have seen businesses that have remained unchanged for decades, still using outdating equipment and methods such as typewriters and accounting ledgers. Don’t be afraid to change with time and technology – you don’t want your business to be left behind.
- Customer service Remember that your business is only as good as your customer service. So provide your customers with outstanding service, even if it means going that extra mile. It will be worth it when those customers give you their business, loyalty, and most importantly, referrals.
- Professional help Don’t hesitate to enlist the services of financial or consulting professionals. There are many financial management consultants, banks and other professionals who are willing to help your business for a fee. Once you realize that you need it, make sure you seek help before it’s too late.
Do whatever you need to do before your business reaches the point of no return. Do not procrastinate. By planning to avoid severe financial difficulties, you will save yourself and your business both time and money.