Typically when a business goes through a tough time financially the business owner will either handle it really well or they will make matters worse by doing everything wrong. And doing everything wrong generally starts with ignoring the issue and waiting for the nasty phone calls to start as suppliers chase their money.
Over the years I’ve had a lot of experience working with businesses that got themselves into financial trouble (and had my own businesses that went through very tough times). The following ideas will go a long way to help any business through a tough time on the horizon, to not only survive but also to keep their reputation intact.
1. Be proactive – don’t wait till there is no money in the bank to take action.
One of the biggest mistakes people make is only taking action when they are in dire straits. The reality is that we should know our business enough to be able to see the writing on the wall that indicates a tough time ahead – and what that actually means. So there are two parts to this recommendation – firstly make sure you have your finger on the financial pulse of your business and secondly, take action the minute you see a bump in the road on the horizon.
2. Work out a plan – and make it realistic.
Take the time to work out a good financial strategy, specifically how you will pay your suppliers, your staff etc. Plan for the worse case scenario, start to work out where you can get extra funds from and put your plan into a hard copy – with week by week actions that need to be taken.
3. Start talking to your suppliers as soon as possible.
It’s much better to let your suppliers know that you may have a challenging time ahead before it happens. Have an honest and open discussion, explain what has happened and most importantly what you are planning to do about it.
4. Any payment plan you make, honour it.
Only ever commit to a payment plan you can honour. Another common frustration in these situations is an overly optimistic commitment to repay debts that is unlikely to be honoured, but given in the hope of keeping a supplier or financier happy. They get very unhappy when you miss a payment.
5. Never stop communicating.
This is another biggie. Don’t make your suppliers chase you for the money. Nothing is more frustrating and it is what drives suppliers to take legal action. If you owe them money, it is your responsibility – be adult about it and have very open lines of communication. Commit to talking to them personally with a regular update and a commitment to let them know if things get worse. Then make sure you do.
6. Let your staff know that there is an issue and what you are doing about it.
Often business owners think that they can keep financial issues confidential – that just isn’t the case. Calls coming in chasing debts, the accounts staff talking to others, rumours and gossip in the industry leak out. It is much better to be up front and honest with your team, don’t be alarmist, but be honest. Most importantly, spell out the steps you are taking to get through, and let them know what help you need from them. Don’t underestimate just how much your people will do to help and support you.
7. If you have to make a hard decision, make it.
With tough times on the horizon, you might need to make some very hard decisions regarding staff, regarding spending and regarding your business overall. The key here is to make them, don’t sit on the fence as things get worse, take action and take it quickly.
8. Stay cool.
Throughout the process, it is vital that you keep your cool, stay in charge and stay confident. Now there will be times where this is tough, but it is important that those around you see you as being in charge and doing what it takes to get through. If you start to fall apart, the business will fall apart.
9. Don’t neglect your existing customers
Another common challenge in tough times is that it’s easy to ignore your current customers whilst dealing with the problem at hand. Of course this is the time that we need to take extraordinary care of our existing customers especially if news of our challenge leaks out. In your strategy ensure that you have detailed actions to continue delivering high levels of service and do whatever you can to strengthen your customer relationships.
10. Get creative with your existing customers.
It might be time to look at creative ways to get your current customers to spend more with you. Look at pre-purchasing products and services at a discounted rate. Meet and talk about future projects, any referrals they may be able to offer and can they identify any other opportunities. You don’t want to look desperate, but you do what to be seen to be proactive and you might be surprised by just how much support you get from your existing customers.
11. Ramp up your business development – big time.
In tough times it’s really easy to stop business development because you are stressed out, worried about getting the cash in and fearful of the future. The reality is that there has never been a more critical time for you to business develop. Apart from the obvious fact that it will generate more cash, it will get you out of your own head, talking to people, selling yourself and being proactive. As you start to generate some new business you will feel better and become much more positive.
12. Never forget those who have helped you when you get back on your feet.
To me this is seriously important. Once you are back on your feet and business is good, it’s easy to forget how close you came to going over the edge financially. Never, ever forget those suppliers, customers, staff and advisors who helped get you through. Be prepared to help them if they are in need and support them where you can. Take them for granted and if you get into trouble again, they might not be quite so happy to help.