We expect the good times to continue to roll along but sometimes they come to a shuddering halt. At that point, it becomes immediately obvious that steps must be taken to adjust how the business is managing to address it. Doing so quickly avoids a worsening scenario.
Here is how to manage your business if the business contracts due to an economic downturn or any other reason.
Review All Current and Future Expenditures
Look at the planned upcoming expenses of the business. See what can be deferred or eliminated. Aim to keep as much of the current checking account balance in place as possible.
Look for a lesser version of the same product or service to swap it out before completing the purchase. Switch to a more economical brand or find a free alternative. Also, consider recurring expenditures to see which are still required, can be reduced or cut out completely.
Keep a running total to see what savings have been made through these changes, both in dollar amounts and in percentage terms. It helps to see the progress to know it’s been worthwhile.
Look at Customer Acquisition Costs & Marketing Efforts
Examine what is being spent on new customer acquisitions. Look at the different ways that marketing is performed and analyze how successful each method has been for the business.
Strip out the least successful methods to maximize the return on each marketing dollar.
Depending on how difficult the company’s finances currently are, consider scaling back marketing expenditure in the short-term to temporarily improve the cash flow of the business.
Money Tight? Consider a Collateralized Business Loan
It may be advisable to take out a loan to provide much-needed money in the business account. This will allow you to manage the cash flow better while the situation is less certain than it once was.
Sometimes, a company isn’t able to get approval for a regular business loan due to having a shorter business duration, a less than stellar credit history, or for other reasons. In which case, it may be sensible to consider a business loan with collateral.
The idea with collateral (assets) is that they hold some residual financial value that provides backing for a loan. The collateral might be business equipment, commercial property, other business interests, or future accounts receivables based on invoices issued. It offers greater security to the lender that should the loan be defaulted upon, they have a way to get their money back.
Adjust Staffing Hours
Look at whether all staff are needed on a part-time basis. It may be possible to adjust some people to fewer hours temporarily until business picks up.
For those members of staff who’ve made the switch to work from home, if this is made permanent, there are cost savings available. Indeed, the business could move into a smaller office if the office-bound workforce is halved and the lease is almost up. The possible savings would include the new office lease, rent, electricity usage, and more.
In a money tightening situation, acting sooner and not later, is important. Each step in the right direction eases the financial pressure making more severe changes less necessary. Ultimately, it buys time until the situation improves.