The running costs for a business are increasing yearly, meaning owners, stakeholders, and the board are all under pressure to make bigger profits. Over the last few years, businesses have had some of the most turbulent times we’ve ever seen. Surviving through these periods isn’t easy, and sometimes tough decisions need to be made.
Avoiding liquidation isn’t always possible, but there are steps you can take to help protect your business.
What you can expect in this article:
Diversify Income
A business that has gotten too comfortable might stop looking at extra ways to make a profit. That is a dangerous mindset to get into. Additional sources of income are one of the key ways for a business of any size to survive the tough times.
Take a look at the products and services you already profit from – are there easy ways to expand that? Are there areas where you may have opportunities to move into?
Extra income can also come from selling any machinery, equipment, or things that you no longer use. The same goes for any excess space you own that can be rented out to other companies. Get creative.
Outstanding Cash
There are always a few clients that seem to pay late, and that causes havoc for your cash flow. Chasing payments takes up time and resources, which means that productivity and new clients aren’t going to be a priority.
Clients that owe you money, no matter how small it might be, will be keeping your business leaner than it should be.
Double down on efforts to collect, and consider taking legal action to collect what is owed. It is a good idea to look at how you have been collecting payments until this point and adjust the process.
- Nonrefundable deposits
- Early payment incentives (a discount is usually a good option)
- Easier payment options
- Late payment charges
Cost-Cutting
Cost-cutting can be a very painful part of trying to stay afloat. It is often a good idea to get a professional to take a look at the business. A fresh perspective can be vital, but the professional has no personal ties and links to the company so they can make swifter (and sometimes more brutal) decisions. Ultimately leaving you with the best version of your company.
Cost cutting can take many forms; here are some of the most common:
- Overdue personnel actions (people who are not doing their jobs)
- Reducing spend in all departments
- Look for miscellaneous spending (stationery and so on)
- Hold all pay increases and bonuses
- Look at workload
- Look at any coordinators and liaisons
- Reduce any service levels that are grossly over requirements
- Consider automation over manual processes
- Cut any meetings that are 100% necessary
Read more: How To Cut Down Overheads In Your Business.
Communication
Any board members, investors, and stakeholders need to have 100% clarity through everything that is happening. It is not uncommon for this set of people to become uneasy during these phases of business.
After all, their and your reputation is at stake here. Open discussions are very wise when it comes to directors, and you should be prepared to take action yourself or to have action taken by https://www.ndandp.co.uk/director-disqualification/ if insolvency comes into question or disqualification is possible.
Support Programs
When you start a company, many grants, loans, and investments are possible. And the same is possible for companies that are struggling.
There are many ways that you can whip up some income to help keep the business afloat for a while:
- Ask investors to reinvest
- Use any company savings or sell assets
- Venture capital or Angel Investors
- Personal Loans
- Government loans and grants
It is important to know when it is time to give up because sometimes throwing money at the problem ends up with a bigger debt and no company.
Repayments
If your outgoings are stacking up thick and fast, it is time to start contacting the companies and arranging a payment plan that better meets your current needs. In some cases, a payment or interest freeze can be arranged.
These negotiations can be tough, and if you have many to get through, it could be better to hire someone to do this for you. Creditors are usually very reasonable and willing to make accommodations to ensure that they get their money. A mistake that many businesses have made is ignoring the demand letters and letting the issue make it to the bailiffs and courts.
It is not always possible to avoid liquidation – but taking innovative steps as soon as possible can help prevent disaster further along.
