SO, YOU WANT TO START A BUSINESS? FIRST CONSIDER THE FOLLOWING FACTORSMay 30, 2016
POPI UpdateJune 6, 2016
There are many signs that a small business is failing. The bad news is that to ignore these signs and just carry on doing business as usual, will most probably lead to bankruptcy and/or closure of the business. The good news is that regardless of how poor the business’s current financial situation is, there are steps you can take to improve its finances.
Although there is no “one size fits all” solution to save a failing business, there are some general strategies any business can implement to improve its financial position. Some of these strategies are only short term solutions while others may be a more permanent solution, depending on the unique circumstances a business finds itself in.
- Pinpoint the problems:
Find out exactly what the problems are which cause your business to fail. Each business is unique and so are their problems. It might be worth it to work with your financial and business advisors to determine how bad the situation really is and get their advice on how you can turn things around.
- Consult with your customers:
Talk to your customers, especially the ones that you lost to the competition. Try to find out why they stopped doing business with you. If possible, make an offer to save the relationship, but remain reasonable. If an ex-customer decides to take up your offer and you do not deliver, you will get a negative reputation and chances are very slim that the client will do business with you again. Also ask your existing customers for suggestions on how you can improve the business.
- Consider all your financing options:
The following options can be used, alone or in combination, to finance your business:
- l Personal , friend and family financing
- Bank loan
- Government grants
- Credit card financing
- Rethink advertising:
Try to determine which advertising method bring the most ideal customers to your business. You don’t want to spend money on advertising that does not reach your target market. Word of mouth referrals are still the best form of advertising, so encourage existing customers to recommend your business to people they know.
- Short term cash flow planning:
Draw up a short term cash flow plan. Make it as detailed as you possibly can and include prioritising of debt payments. If you can, do keep paying your bills in full and on time. Speak with your suppliers and see if you can renegotiate better terms with them.
- Cut expenses:
If an expense does not contribute directly to the profit of the business, it probably can be cut but also be careful to cut too deeply. Cut expenses as much as you can without harming the business.
Take an especially hard look at recurring expenses that you have to pay every month. It doesn’t matter how small the amount is – all the small amounts add up and will make a difference to your cash flow. Compare actual and budgeted expenses every week rather than once a month. The earlier you can catch an overspending problem, the easier it will be to fix it.
If a struggling business owner addresses the above points, it can significantly increase the chances of saving the business. The above steps can also be looked at by business owners whose businesses are still doing fine, but they want to make as sure as they can that they don’t fall into hard times.
If you have any questions about the above information, please do not hesitate to contact our office. Our staff are friendly and knowledgeable and are looking forward to the opportunity to assist you.
This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)