Eight Tips and Steps That Can Help
There's no doubt that every business can experience some rough spots. Many of the financial realities of business can quickly become problems when not dealt with properly. Most issues can be resolved sensibly, but the most professional approach is to address them head-on, get the help you need and plan for both the long and short-term solutions that will help you and your company get back on track.
- Face the facts
- Identify and address the root cause of your problem
- Seek help
- Generate cash quickly
- Keep your key business partners fully informed
- Negotiate extended terms with your creditors
- Restructure your debts
- Formulate a turnaround business plan
Face the facts
Are you working non stop and yet unable to earn a reasonable income? Are you avoiding calls from your creditors? Are you placing stop payments on cheques you don't have the funds to pay? Are you wondering how you will meet your company's next payroll?
Tip: Take the first step towards resolution: Be realistic about your company's situation.
Identify and address the root cause of your problem
Are you trying to do everything yourself? Are you losing control? Do you know why you just lost one of your top accounts? Are your sales or margins declining? Do you know how much income your company generates monthly? Weekly? Daily? Do you know how much it costs for each activity your company performs to earn revenue?
Tip: Make sure you know exactly how your company makes money. Which activities are the most profitable? Which are the most expensive?
Seek help
Do you have all the necessary skills to deal with your business problem? Can you devote the required time to formulate and implement adequate engage the services of a professional consultant?
Tip: Don't try to resolve everything yourself. Look to others within and outside your business for their expertise and assistance.
Generate cash quickly
Can you sell some assets that you are not currently using? Can you sell and lease back key assets that are tying up working capital? Can you collect some of your receivables faster? Can you get some of your suppliers to take back inventory? Can you sell some of your slow moving inventory at a discount?
Tip: Prioritize the use of your available cash; take care of critical obligations related to the ongoing operation of your business first, such as payroll, rent and related taxes.
Keep your key business partners fully informed
Do you have sufficient funds to cover the rent? Are you about to miss a loan payment? Are you past due in paying one of your key suppliers?
Tip: Inform your key business partners of your situation prior to breaking a commitment with them.
Negotiate extended terms with your creditors
Can your banker live with interest only payments until you get your new plan in order? Did you have an aggressive repayment plan on your loan? Can this plan be amended to better suit your current situation? Will your key suppliers accept a partial payment prior to shipping additional goods? Will your key suppliers accept a note for past due invoices repayable over an extended period?
Tip: Seek the collaboration of your creditors and aim for a win-win solution for all.
Restructure your debts
Did you use your operating line of credit to purchase a piece of equipment? Can you restructure your operating debt and obtain a term loan to free some of your working capital? Can you convert some of your debt into equity? Will any of your key suppliers be willing to purchase a small interest in your company in exchange for forgiveness of the debt? Can you personally inject additional funds into the company?
Tip: Maintain a favourable debt-to-equity ratio in keeping with the standard of your industry.
Formulate a turnaround business plan
Have you identified the root cause of your business problem? Have you got a plan in place to address the problem? Will you be able to measure the success of your plan in a short time? Can you get the cooperation of your key business associates?
Tip: Put together a plan that addresses your key business problems and enlist the cooperation of your company's key stakeholders.
