At some point in your business life cycle you’re going to experience a cash flow crisis, it might be in the start-up phase because you’ve underestimated how much time it would take to generate sufficient sales, it might be several years later when economic forces cause many of your clients to close shop or downscale to cheaper (not better) providers.
Whatever the reason, you’re going to have to take some drastic steps to ensure the survival of your business!
So! What steps can be taken to give your business the best shot at survival?
The first and most important thing is to realise that this is a serious situation! Action is required immediately! Don’t sit around and hope things might get better!
The quickest thing you can do is cut costs, but don’t be rash, go to market and get quotes for all the expenses you’re currently incurring – traditional landlines can be replaced by VOIP, insurance can be reduced, offices can be scaled down, etc. – and then make a sensible choice.
If you have staff and you need to reduce their numbers, you can’t just fire them, contact an HR consultant or the Department of Labour to assist. Following the correct procedures, while laborious will save you money.
While you’re waiting for quotes to reduce your expenses, begin contacting all the clients you’ve ever quoted or done business with in the past two years and reconnect. Find out why they’re no longer doing business with you or why they didn’t accept your quote. Their feedback will accomplish two things – (1) You may receive orders and (2) you’ll have a better indication why your target market is not buying from you!
This information is crucial as it will form the basis of your turnaround plan!
Okay, so now you have a good idea of why you’re not making money and what expenses you’re able to cut! If you’re lucky, your expenses will be less than your income and you can then begin rebuilding your business. If you’re still in a position that your new reduced expenses are still more than your income and you’re unable to reduce them any further, what now?
The choices are, shut your business or if you’re very confident that you can trade yourself out of this rough patch then contact your suppliers and let them know that you’re going through a rough patch and will make reduced payments for the foreseeable future. Just never make promises you can’t keep, base your payment plan on actual numbers then focus all your efforts on driving sales as this is the only thing (coupled with customer service) that will save your business.
At Phezulu VBO we do more than just assist clients with turning their businesses around, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.
For more information, please visit our website or give us a call on 010 003 8558