Many small businesses operate with a tiny room for financial errors. Statistics show that most of the businesses have acute financial problems whereby very small mistakes could lead to business collapsing. This explains why most of the startup organizations fail to compete with established companies. If you are a small business owner and you have been experiencing substantial financial problems, here are some of the techniques that can help you to fix it and enjoy some financial freedom.
1. Create a Budget
A budget is a financial statement that shows the expected financial income and financial expenses of a business. With a professionally prepared budget, you can clearly understand the needs of your business. You are in a position where you can figure out whether your organization will be operating on a profit or a loss. If your budget indicates that you will be experiencing losses in the future, you need to come up with strategies that will reverse the trend and avoid losses.
2. Negotiate Your Financial Obligations
There is no doubt that your business has very many financial obligations that it has to meet. As a business operator and owner, you also have some personal obligations as well. The fact that your business is experiencing financial turmoil means that you are also struggling to meet your financial obligations. You can decide to negotiate with most of your financial organizations and other service providers so that you can be allowed to meet your commitments later. Rent, lease agreement, term insurance premiums, and business insurance are some of the financial obligations you can negotiate with providers to pay later.
3. Cut Unnecessary Expenses
Most of the small business organizations experience extreme financial challenges because they have very many unnecessary expenses. You need to conduct comprehensive analysis in your business so that you can determine some of the costs that can qualify as unnecessary. For example, if your organization is using too much on energy, you can install solar panels to provide energy and light at night. You can as well invest in energy efficient electrical components such as energy savers.
4. Outsource Various Services
Your small business organization might not have grown to the extent of needing a full-time auditor. So, why should you have one in your organization when you are already experiencing financial challenges? Outsource for all the services that are rarely needed in your company. Cutting on the employment expenses for full-time employees and outsourcing various services has the potential of saving your business thousands of dollars. This is a strategic plan that has been used by many companies to navigate touch financial challenges.
5. Financial Forecasting
This may look similar to a budget but is significantly different. Financial forecasting gives you a real picture of your finances concerning what will happen in the future. The market is likely to change whereby the demand for goods drastically declines due to changes in consumption patterns. Good financial forecasting will give you a hint of whether your company will have the necessary funds to compete and deal with the emerging financial obligations.
6. Close Non-performing Branches
Statistics show that more than 20% of branches owned by small business organizations are loss-making. This means that they depend on profit-making branches to continue with their operations. In tough financial circumstances, you don’t need to have an additional burden to your company. You need to harvest all the branches that are not bringing anything to the business. This will not only help you to cut operational expenses, but it will inject capital to your business by selling some properties.
7. Halt Expansion Process
The list of businesses that have collapsed while engaging in aggressive expansion activities is unending. There is enough evidence that aggressive expansion, especially for small businesses leads to financial distress. If your company has not fully established itself in the industry, avoid anything to do with expansions. Just concentrate on the branches that can be supported by the available resources. You will only be required to engage in expansion activities when you have sufficient funds to handle two independent businesses.
8. Apply for Small Business Loans
If you have undertaken the necessary strategies to reverse the trend, but you have not seen positive results, the next step should be to apply for small business loans. There are many lenders out there willing to inject some funds in small business organizations. However, you should only accept low-interest loans that are payable in the long term. You might make the mistake of securing a loan only to put your business in complicated financial problems.
These are some of the strategies you can incorporate in your small business to deal with financial challenges. Most of the financial difficulties in the industry are caused by external and internal factors. While it is easy to deal with internal factors, you will only rely on government or forces of demand and supply to solve external business factors.