Has your small business been blindsided by an unexpected financial emergency and do not know what to do? Whether it’s a loss of a major account, medical expenses, or an emergency office repair, an unexpected change of your business financial situation can be incredibly stressful.
“The bills still need to be paid, the utilities need to stay on, your employees need to be paid, and you need to put food on the table, so how should you cope with a financial crisis of your business?”, says Petro Surman Independent Financial Adviser and Owner of Pro-Sure Brokers.
1. Evaluate the Situation
Take a moment to sit down and carefully evaluate your situation. Running around in a panic won’t solve anything and only lead to additional stress. Understandably, you probably have a million things running through your head and being cool and collected is the last thing on your mind, but the ability to carefully evaluate your situation will ensure you make the right choices.
First, determine what caused this financial emergency. Before you can look at ways to resolve the situation, you need to understand the cause. Is it a sudden loss of your business income? Mounting expenses that you can’t keep up with? While each situation can lead to similar burdens, your plan of attack will likely need to address the root of the problem so that it becomes effective in the long run.
2. Prioritise expenses
Not all expenses are created equal. There are certain bills that need to be paid before others. Some of the most important items to put at the top of your list should be food and shelter. Is it worth risking foreclosure to keep your DSTV bill current? Obviously not, so carefully examine all of your expenses and determine which are the most important.
Once you’ve established which bills are the most important, you can begin looking for expenses to cut out of your budget. While it might not be much fun to cut out some of the things you’re used to, it might be what’s necessary to keep you from slipping into an even deeper financial hole. Look for ways to cut back or eliminate things completely.
3. Negotiate with lenders
If you’re having trouble with corporate cards, or even your mortgage, the first thing you should do is call your lender. Believe it or not, it’s in their best interest to help you make your payments, even if it means a lower interest rate or extending the terms.
People so often wait until they already get severely delinquent before contacting their lenders, and by then they aren’t as willing to work with you. If you know that money is getting tight and you might need help, call them before you get behind.
4. Find extra money
Ideally, you want to have some money set aside in an emergency fund to help pay for any unexpected expenses, but this isn’t always possible. Where do you turn when you’ve exhausted your savings account?
See if you can access monies from your short term investments. You can always try to get a loan or use credit cards, but these may only make the problem worse. While borrowing money can provide quick access to cash, it can also come with high interest rates and a new monthly payment.
5. Get the world off your shoulders
In a crisis, many small business owners act like an Atlas, carrying the weight of the world on their shoulders. They go into isolation, and think they can solve the problem themselves. In reality, leaders must have the help of all their people to devise solutions and to implement them.
This means bringing people into their confidence, asking them for help and ideas, and gaining their commitment to painful corrective actions.
6. Be aggressive in the marketplace
This may sound counter-intuitive, but a crisis offers the best opportunity to change the game in your favor, with new products or services to gain business and strengthen your income. Many people look at a crisis as something to get through, until they can go back to business as usual.
Why not create the changes that move the crisis in your favor, instead of waiting for things to get better make it better with a new market approach.