Take control of operational obstacles that may have you in the red.
As a business owner, this may be old news to you: According to the National Small Business Association, following the economic downturn, a resulting shortage of capital and other issues, many U.S. small businesses have struggled in recent years. In fact, the association’s most recent economic report found that one in three small business owners currently lack confidence in the future of their organization.
Overspending, trying to do too many tasks and other missteps can wreak havoc on a company’s day-to-day operations. But many concerns can be resolved by addressing them head-on.
If any of the following statements sound familiar, the suggestions below may help you turn your company’s situation around — and get your business back in the black:
- Situation: “I can barely keep this business afloat.” You’re probably mentally and physically exhausted, working nonstop, but not earning enough money. You’re dodging creditor calls and wondering how you’ll fund your company’s next payroll.
Tip: Be realistic about your company’s situation.
- Seeing little to no revenue after making significant changes, leaning too heavily on external funding and feeling burned out can all be signs your business isn’t making it, according to Inc. At that point, it’s time to decide whether you want to try to revamp how your business works — or disband operations.
- If you want to revamp, identify the root cause of your problem, and get some help by looking to others within and outside your business for their expertise.
- Situation: “I have no idea what our cost margins are.” Are you trying to do everything yourself and are too busy to calculate how much each action costs to perform — or to keep track of what income your company generates monthly, weekly or daily?
Tip: Stay on top of reviewing your financials.
- Knowing how your company produces a profit is crucial, so set aside time to review your margins regularly.
- To get started, check out the Houston Chronicle’s guide to figure out which activities are most profitable to your small business and which offer low returns/ROI.
- Situation: “I’m being pulled in 90 directions.” You’re only one person. And on the best day, running a small business is time consuming. But when times are tough, you may try to cut back on staff and take on more yourself. And then you may find you don’t have the hours — or background — to determine solutions for every issue that comes up.
Tip: Don’t try to do everything yourself.
- There are some tasks that business owners should never delegate: for example, decisions that affect your entire company, according to the National Federation of Independent Business. But for other things, you can (and should) depend on employees and business partners to handle tasks that are their responsibility.
- Have issues your staff can’t handle? Consider hiring a professional consultant. For tips on successfully managing a consultant, check out Fast Company’s The Real Reason to Hire a Consultant article.
- Situation: “We need a quick cash infusion.” Not tomorrow, but today! If maintaining operations will require some fairly immediate funds, you may need to get creative.
Tip: Prioritize spending and examine your assets.
- To conserve cash, prioritize your spending to take care of critical operation-related obligations first, such as payroll, rent and related taxes.
- Also examine your company’s assets. Can you sell some items you aren’t currently using — or sell and lease back key assets that are tying up working capital? If you’re sitting on extra inventory, try to get suppliers to take it back. Or, you could attempt to sell some of your slow-moving inventory at a discount to increase your amount of available cash.
- You may also be able to obtain funding from an outside source, such as a Small Business Administration Loan. To get started, check out SBA.gov’s Loans and Grants Search Tool to search for financing programs you may qualify for.
- Situation: “My company’s amount of debt is becoming a problem.” That balance you try to keep in your debt-to-equity ratio is severely out of whack. You want to get your ratio in line with your industry’s standard.
Tip: Realize that you may need more than just cash to fund your business’s start or growth.
- Consider these five steps for managing your business-related credit from the Small Business Administration.
- If you’re already experiencing debt-related cash-flow problems, try to restructure your operating debt and obtain a term loan that you’ll pay over a set time period to free up working capital.
- See if your bank would accept interest-only payments until you’ve made significant changes.
- If you know you’re about to miss a rent, loan or other payment, let your business partners know.
- Offer key suppliers a partial payment in exchange for a shipment of additional goods or a note for past-due invoices repayable over an extended period. Consider offering suppliers a small amount of interest in your company in exchange for debt forgiveness.
Once you’ve identified your company’s main issues, create a business plan to deal with any problems and get operations back on track. Include ways to measure the success of your actions over a short time period — and, to prevent any potential roadblocks or delays, share your plan with key business associates before implementing it. Getting them on board can help ensure your plan’s success.