It seems that everytime you turn on the TV, pick up a newspaper or look online, yet another well known chain has gone to the wall. In difficult times like this when even the huge companies are stuggling, it can be terrifying for small business owners trying to battle the trend and stay afloat.
It is hard to ignore the fact that there are currently 140 firms in financial conditions considered “Critical” and that there were more then 13,700 who were in “significant” financial distress in the final quarter of 2012. Something reported by The Guardian late last year.
Many are blaming a mix of poor economic conditions that are making consumers think twice before making any non-essential purchase, and the increase of the dominance of online shopping for the sharp decline in footfall and sales of the bricks and mortar shops of the high street.
As a small business owner, it is essential that you realise that there is
a risk that your business may fail and that you need to act on reducing this risk while
you still can so that you can turn around your business and keep it at least
secure and profitable even if you cannot grow it in this economic climate.
Admitting there is a problem.
It is a bitter pill to swallow that your business might fail, especially if yours is a business that is either brand new, or has taken many years to grow. Admitting that there is a problem and that the business is in trouble is often difficult, it is a lot easier in most cases to bury your head in the sand in the hopes that it will
all go away but the first vital step in turning around your business is to admit
there is a problem starting to develop.
As a business owner naturally you have a vested interest in the business, after all
you have invested time and money into it, therefore turning your business around and doing what you can to keep it stable
be top of your list of priorities.
Some of the things you will need to do will take time and could be difficult, for example cutting
costs, talking to suppliers to try and get better terms and rates, diversifying
into other area or even making staff redundant, so it is important to take
action as soon as you have decided what needs doing. However, it is important that you don’t have a knee jerk reaction and rush into a decision you later on end up regreting. You have
spent time and money building your business up so a few days of careful consideration
is called for.
Some of the options that may be available to you include:-
- Increasing your profit – if you are loosing money on a deal why carry
on with it, a turnover of £10 million is no use if your costs for that project are £11
million. Concentrate on the deals where you are making the most money. If you aren’t sure which deals these are then spend some time going though with a fine comb to check the figures of all your income streams and concentrate on the most profitable.
- Credit check each client you take on, there is no point taking on a customer that will run into financial difficulties before they have paid their bill. Even before these difficult times, it happened far more often the business owners realised and has been responsible for many business failures. It is known as the domino effect, someone further up the chain goes bankrupt and it works it way down the chain. A good example of this is Woolworths who relied on other companies to supply them with their goods, and their collapse in turn affected other shops who relied upon them to supply them with their stock items.
- Don’t be afraid to chase customers for quicker payment of their debts to you. If payment
terms are 30 days start asking for confirmation that the payment will be
made after 20 days, try not to let the debt go past the due date –
you are effectively lending your customers money when they buy on credit from you so why let them borrow it for longer than they need to, banks certianly wouldn’t give you the same grace.
- If you need to, consider active business debt recovery and discuss it with your book-keeper or accountant, maybe ask them to handle this for you (if it is something they are willing to do) as people are less likely to try and fob them off, don’t just sit back and think that people will pay you.
- Keep control of costs, even down to small items – for example, it
may be nice to have top of the range coffee for staff and visitors
to drink but why not save money and buy own brand coffee. This works across the
board, look at everything you purchase and ask if there is a cheaper option
that will work just as well.
- Talk to your bank or other lenders about trying to restructure the finances
so that you reduce interest payments.
- Talk to your accountant about tax savings that may be available, if you do not have an accountant, or you are unhappy with your
current accountant, find a local accountant by using the internet or talking to friends.
Remember that to turn your business around successfully will take time and
effort and may involve some heartache (especially if you have to lay off staff)
but the longer you leave it the higher the risk that you may well not be able
to rescue your business in time.