For small businesses, it might feel like you have to struggle with these moments for longer while you wait for the consumer base to grow. It won’t always be pleasant to deal with, but if you fail to adapt, you can come dangerously close to losing the whole business. You have to be flexible, aware of the situation, and knowledgeable of the options out there.
Know your funding sources
The greatest crisis during those lean weeks or months that you’re likely to face every year, depending on the business model, or during big expenditures like during a scale, is that your revenue is no longer enough to cover your costs.
The first way to deal with that is by finding new ways to bring money into the business. This is one of the best reasons to open a line of credit in the business. Whether it’s a bank loan, a credit card or even business loans for bad credit if you’ve already extended your line of credit as far it goes. Regardless of how healthy your credit score, it pays to be aware of the different funding opportunities available. It’s better to spend some time in debt than to lose the business.
Be ready for cuts
The other side of the equation is the costs that your revenue can’t cover. There is always fat to be trimmed from the business, your only challenge is how you’re going to find it. If you’re suddenly thrust into financial peril, it’s easy to start making cuts you really shouldn’t.
For instance, reducing your staff should always be considered a last result. When you have to cut costs now, it’s good to have a list of costs ready, prioritizing which you can cut first. It might mean selling some extra equipment, switching out a premium software package for a free alternative, or looking at different suppliers, for instance.
Work better with your debts
Debt can be an effective tool for when you really need a loan to keep the business afloat. However, irresponsible use of them during your more regular months can have a knock-on effect down the line. If those debts are still there by the time your lean season of the year comes around, they’re going to force you to lend even more money and cut even more costs than you should.
Have a debt reduction strategy as part of your regular business finance operations at all times. This might include software like credit card optimizers that help you stay on top of the regularly used plastic. That’s not to say you can’t use a little credit now and then when you need it to make an investment. But be proactive with lowering it when possible.
Flexibility is crucial to a business’s success. Not just when it comes to financing, but primarily so. Access to funding when you need it most, a strategy to reduce costs, and a continuous balancing of the books can keep you in the green during those lean months.
Contributors
