Running a business is not just about doing commerce, but it’s a choice of a lifestyle - how one lives, behaves, thinks or manages. These choices are to be made at every moment of the journey which one embarks upon while starting a business. Money is something that’s required for an entrepreneur to remain on the course. Therefore, it’s not surprising to see that 90% of start-ups fail and shut down in the first five years due to the high operating cost which is not met by marginally low profits.
Skipping rest of the facts and cutting a long story short, only 2.5% of businesses succeed in making it big in today's scenario of advanced technology. You will be fooling yourself if you think that these businesses never had a major financial challenge. From my experience, I believe that one of the significant and critical reasons for business failure is poor management during a financial crisis and not the crisis itself. Through this article, I want to share key insights that I have learned throughout my journey of establishing my venture on how to overcome financial challenges in your business and spare you from closing your eyes on your dream.
Focus on the solution
It is imperative being an entrepreneur to stay focused on finding the solutions rather than wasting time in cribbing about the challenges. Before you even start working on the management, keep your head straight and stabilize your mind. Remember, it’s okay to have such a crisis, but it’s not correct if you try to resolve a critical situation with a negative mind-set. It’s only with the positive attitude that you will look for possibilities of different solutions and eventually get one.
Get rid of non-essential assets
The financial crisis in the business is the time to be the most practical. Make a list of all the valuables including obsolete/old machinery, property and anything that is not integral to running your business which you can sell and have a cash inflow. It’s best advised to pre-close your FD, terminate SIPs and sell your short-term investments for quick liquidation. You can then use the money to carry out your operations.
Tone it down for a better plan
In the midst of chaos surrounding the financial crisis, it is suggested that you slow down the pace of your business. It does not mean that you halt your trading or manufacturing but take one thing at a time and assess where you can improve. So, you will have enough time wherein you might come up with a high potential idea that can completely change your business. Of course, you will require finances to implement the new plan. But you can always pitch in the idea to an angel investor or a bank, and if they believe in your vision, you can surely bail out of your current situation. Toning down the pace is also beneficial because then as a director or proprietor of the company, you can analyze immediate future concerns and plan out accordingly with a broader vision.
Exploring other financial avenues
There are many short-term loans available from the banks as a means of acquiring quick cash with the negligible interest rate. These facilities include taking an Overdraft for a short period (1-3 months) on the credit limit allowing you to draw more cash than you have and payback in said time when the situation is stable.
Make redundancy if needed
As an entrepreneur who has seen enough hardships in her journey, I understand that sometimes running a business becomes all about staying in the market anyhow. And during the time of financial challenge, one way to cut down your expenses significantly to sustain your business is to make redundancies. Though it may sound unfortunate, it eventually helps. However, I would rather suggest using this strategy as one of the last resorts to save the company when it’s absolutely unavoidable.
Take an expert advice
Do not shy away or take it on your ego from asking help from a friend or a professional who has expertise in the field of financial management. They will often come up with a unique way of implementing a strategy or find a novel solution which you could not have thought. Never leave it too late for consulting an expert because every solution has its spectrum of dealing with problems. If things are messed up enough, then I'm afraid no solution might work.
Having a proactive approach
If you have been able to overcome your financial strains, it does not mean that the crisis will not hit you again. Be proactive and take out a decent portion of your profit in buying assets like profitable properties or invest in a venture so that you can liquidate money by selling those assets or have a constant influx of money as a profit share from the venture. Please consult with professionals before putting in your hard-earned money anywhere.
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