How to Survive Tough Times in Your Business



 
"Business, like politics, is the art of the impossible."
 

They say that if after his marriage into the Wedgwood pottery family, scientist Charles Darwin had applied his genius to commerce, he would have arrived at the same conclusion that he made about natural selection – The survival of the fittest.

Survival is the hardest part in most business ventures and surveys show that well over 70% of small businesses close their doors in the first 5 years. Of the businesses that fold, over 90% do so because of inexperience and lack of business know-how by business owners.

There’s an old saying “What he did know made him gold and what he didn’t know made him fold”. Here are some basic hints for surviving and keeping free from a business meltdown. They are not in any particular order of importance. They will serve as “brain teasers” and food for thought for your business profitability and at the very worst – your survival.

  • Before you start, make sure you know exactly where you stand financially before you commit yourself. You must do basic budgeting and planning.

  • For most people buying into a good ready-made business with your own money is the safest way to start up because the business will have instant cash flow and a track record of success.

  • When buying a business watch the seller. There will always be a tendency for the seller to overvalue his/her proposition. Everyone thinks their business is worth much more than what it’s truly worth to a potential buyer. Be cynical. Be suspicious. That’s the safest approach for you as a buyer.

  • Always carry out Due Diligence. That is, always check out every aspect. Some kind of survey or investigation is better than nothing for even the smallest business operation.

  • Before signing a lease for premises always read the terms thoroughly and discuss fully with your solicitor before signing.

  • Keep good records. You can understand initial losses due to inexperience but losing money or going broke by failing to keep proper books is an act of commercial suicide.

  • The chilliest draft is the overdraft. Overdrafts can be risky even though many businesses owe their success to the assistance received from a bank.

  • Don’t go broke giving credit to others.

  • One of the first things to consider when you are caught with a bad debt is whether it is going to be worthwhile taking legal action to recover this debt or whether it is easier to write it off and claim it as a tax deduction.

  • Keep your eye on the break even point. This is the point at which your business is not making a profit but neither is it making a loss. You are “breaking even”. Your business is only as solid as its ability to survive on reduced turnovers or profit margins.

  • Look after your reserves because if there is one thing that small businesses can learn from big business, it is the art of survival during economic slump.

  • Many businesses have large sums of money tied up in fixed assets such as land and buildings etc. Always review your fixed assets with a view to making cost savings including more efficient financing.

  • Watch your cash flows, improved cash collection leads to increased profits because the funds can reduce your business borrowings.

  • Many businesses tend to hold too much stock for fear of running out. However, if they plan their stock levels correctly there are good savings that can be achieved through reduced warehousing, lower insurance and watching for obsolesce etc.

  • Watch your health in business. High blood pressures, like all diseases, have their favourite targets.

  • Always check business profitability by measuring your venture’s performance against your original budget calculations.

  • Be aware of the right time to go into business. Also be clear about the time to get out if necessary.

  • It’s good to make plans for success – It’s not a bad idea to also have a “Plan B” in case things are slower than what you had anticipated.

  • If you can, bank your cash receipts every day. It saves overdraft charges.

  • Send out your invoices on time or a little early if possible for better collections. Assess the cost to your business of people paying late. Try adding a small surcharge to late payers to discourage them as slow collections can destroy your cash flow.

  • Watch rising costs for matters such as deteriorating stocks or lazy unproductive staff.

  • Always view taxation as a necessary evil that you have a right to minimise legally. Constantly ask yourself the question: “Am I clear on how to minimise my tax?”

  • Owners of businesses should have a greater number of short breaks during the year, rather than one big long holiday because the work load demands usually require that they be not absent from business for long periods.

  • Make sure that you are receiving a good return for the long hours that you put in. If after a number of years you find that this is not the case, ask yourself whether it is all worth it or whether it’s time for a change.

  • The old maxim of “goods well displayed are half sold” can best be demonstrated by watching the display manager doing his rounds in a large department store.

  • Don’t show yourself as being too keen when getting quotes. Experience will teach that the lowest quote for the job often ends up the most expensive.

  • Always ensure your stocks are valued at the lowest value permitted for tax purposes because this can make a big difference in calculating profit subject to tax.

  • Watch the effect of inflation on your sales figures and costs. In times of high inflation the profit resulting from the difference between your sales figures and the costs incurred in producing those sales are distorted.

  • Watch out for excessive costs from deterioration of capital assets as a result of inadequate maintenance and replacements being made at the wrong time etc.

  • Be security conscious. Always light up the areas used by your staff and visitors at night and make sure that you design your entrance way so that everyone has to be vetted by your receptionist before entering your offices.

  • Believe it or not, research has shown that people who skip breakfast make more errors at work.

  • If your staff knows that you are dishonest in your dealings that will only encourage them to be dishonest in theirs. If they know you are swindling someone else, why should they be worried about swindling you?

  • It is fairly common practice to do credit checks on your customers but have you ever considered doing credit checks on your opposition? This can give you some very good information and insight into their financial standing.

  • Creditors form a big part of your working capital usage. Make the effort to utilise your creditors to aid in your cash position.

  • No matter what the size of the business it is critical that you know as much about the techniques of buying as of selling.

  • Business, like politics, is the art of the possible – it is important for you to have a realistic appreciation of your skills, abilities and intelligence.

  • After post mortems held on businesses that go broke are done, it’s revealed that a high percentage show inaccurate costing as the cause – that means one simple mistake can wipe you out.

  • No matter how much your business is booming with big profits rolling in, always keep a firm grip on your overhead costs, particularly items of a fixed nature.

  • “Work your opposition”. Research has shown that opposition can mean increased business for you – some have found that sales increase sharply when a rival business opens up across the road.

  • Whether you employ one person or fifty, be constantly aware of your responsibilities to staff. They are the most valuable asset you have.

  • Price is important but quality and efficiency of the service counts just as much.

  • Have a good slogan. It can sometimes result in customers remembering you. E.g. Johnny took over a run down signwriting business. He put up a huge sign on the roof “Bring it to me and I’ll sign anything” - business boomed.

  • For business beginners, never skite about how much business you are making – that may encourage more opposition into your industry or location.

  • When a restaurant goes broke it proves that this is one sector of small businesses which suffer more than any other from lack of complaints – unhappy clients simply stay away.

  • When a project is failing it’s hard to clearly think out a sensible course of action. If you had already formulated a plan you would be more likely to get out of trouble with far fewer complications.

The golden rule for business survival is to “take time out” of the rat race every 6 months and rewrite your business plan. Get away to a quiet place, lock yourself in for a period and assess and analyse your results to date. Identify your weaknesses and work out solutions for any existing or anticipated problems. Plan to win and never give up, Things are generally not as bad as they appear at first.

Tomorrow’s always another day and you can do it. Finally - The wise US former president Franklin D. Roosevelt once had this simple bit of advice - “When you get to the end of your rope, tie a knot and hang on”.

 

© StartRunGrow
http://www.startrungrow.com






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