All businesses large and small have their peaks and valleys. But some are better equipped than others to weather the downturns, and some experience much longer or lower lows than others. If your company is facing a money struggle you’re under-prepared for, it’s a stressful and scary time. But the following tips for small businesses in financial trouble can help you pull through and turn things around.
Advice for Small Businesses Struggling Financially
- Ask your customers or clients what you’re doing right and what they’d like to see done differently. Feedback from the people who sustain your business is an invaluable tool for improving your products, services, and processes—and for increasing revenue.
- Examine all purchases carefully. Are they truly necessary to operations? Will they generate enough cash flow to pay for themselves?
- Flesh out short-term budgets—even down to the weekly or daily level—in as much detail as possible. Identify places to trim expenditure and make sure you stick to the plan.
- Do the same for your personal budget. When your business is having money troubles, keep a close eye on your personal spending as well as your business spending.
- Reduce overhead, but be careful about cutting costs that negatively affect the quality of your products, services, or customer service. When quality suffers, you may lose customers or clients, and this often triggers a destructive cycle.
- Bring down insurance premiums by increasing deductibles and eliminating coverage on low-risk or nonessential items.
- Shop around for insurance quotes, lower utility payments, and more affordable vendors.
- Look closely at your pricing—and your competitors’ pricing. Are your products or services elastic enough that price cuts will yield an increase in business? Can you get away with small price increases without losing existing buyers?
- Go over accounts receivable. A surprising number of small businesses are lax in pursuing overdue payments, even in the face of financial difficulties. Reach out to collect what you’re owed.
- Go over accounts payable, too. See if you can negotiate better deals with vendors (ask about early payment or bulk purchase incentives). Alternatively, inquire about extensions on your bills if you’re having a hard time paying them.
- Talk to a financial advisor experienced in business planning and accounting. Expert business planning and tax assistance easily provides a healthy return on the investment.
- Sell assets that aren’t generating enough of a return to outweigh what you can make from their sale.
- Review how your debt is structured. Can you consolidate debt to reduce monthly payments? Can you increase long-term debt to get free of burdensome short-term debt? This is a good conversation to have with your financial advisor.
- Ask your banker or financial advisor about options like a Small Business Administration (SBA) guaranteed loan and State-based financial assistance for small businesses.
- Borrow against the cash surrender value of your whole life insurance policy. Or, consider exchanging it for a similar but lower-cost term life insurance policy.