Made a financial mistake in your business? 5 ways you can make a comeback
We know, it happens!
Like everyone, you will also make one or two mistakes, while running a business. This is an essential part of the leading curve. However, you will have to take some necessary steps, if you find yourself in a financial pinch, otherwise, your business might not see another day.
If you're in a similar scenario, then you have come to the right place.
In this article, we have discussed some points which will help your business to bounce back in no time.
So stay tuned!
1. Find Your Positive Variable Contribution:-
First, you have to make sure that the revenue you earn for your products or service is greater than the cost of delivering an additional unit.
If you have many such products, repeat the process for each one of them. The evaluation must be done at the consumer level in case you are charging your customers differently.
As you're in a financial pinch, you have to avoid any contribution of a negative variable. If you find any, take immediate steps like raising the price, reducing the cost of delivering the additional unit, or completely stopping that service.
2. Cut Your Expenses:-
You'll almost certainly have to cut expenditures to stay in business. To begin, cut out all your unnecessary spending, such as office parties or the excitation trip that you have planned. Surely, your employees might not be too thrilled about it, however, you have to prioritize the well-being of your company.
Next, check for the non-people expenses. Can you save money on transportation or utilities? If your storage space has been empty for quite some time, the landlord might be willing to cut corners in his rent, at least temporarily.
Unfortunately, saving costs may necessitate the tough decision of laying off some of your employees, reducing their hours, or lowering their pay. Recession tactics are never comfortable, but if the alternative is closing down your company, then it's better to keep some of them employed than lose all of them.
3. Prioritize Your Payments:-
You owe more money than you have. As a result, you must evaluate your payables as you can't afford to settle all of them.
First, you have to settle those commitments, which can cause you to shut down your company if they are not met on time.
For instance, you have to prioritize the salaries of your employees. As, if you stopped paying them, they will start looking for other jobs with a more stable salary structure. And, without your employees, you can expect to meet the deadlines of your clients. Apart from your employees, you also have to consider the merchants who provide you with the materials you require.
Next, you have to settle those payables which can result in huge fines. For instance, failing to pay taxes on time can result in significant penalties.
And finally, settle those payments which are marked as late. You can leave the unmarked payments for the last.
4. Plan Your CashFlow:-
Now that you have prioritized your payables in the previous step, it is time to plan your cash flows. You can't afford to misplace any of your funds in these tough times. So, to avoid any confusion, make your cash flows plans as detailed as possible.
For example, mention who is in charge of marking the payments, when the payments will be taking place, and also mention the amounts that are being paid.
5. Communicate With Your Creditors:-
We know, it's a bit intimidating to talk with the person who has given you your money, but you can't pay them just yet. Most of the small business owners tend to ignore them or hide from the situation. This is a big mistake, instead, have a chat with your creditors. Explain your current situation to them, and how you are planning to pay back your loan. Most of them will be eager to help you out if they feel that your business will eventually pay back their money.
In case you have taken a loan from a bank, and the deadline is about to be over, then make sure to notify your lender as soon as possible.
Keep in mind that your banker is primarily concerned with getting back their money. If you approach them with a clear strategy to work towards your financial condition and settle the money you owe, he or she is more likely to cooperate.
Every big business has to seem some difficult days, but they have successfully brought themselves out of that. So, if you find yourself in a similar situation don't lose hope, follow these 5 steps, and try to make a strong comeback in your industry.
Author- Adesh Chaurasia
A superior and highly experienced entrepreneur in the field of business for quite a long time now. Also, a philanthropist, author and public speaker who believes in working towards the overall well being and betterment of the society as a whole.