You’d be forgiven for thinking you need a miracle right now to manage your business finance, especially in the wake of such credit tightening and rising costs.
However, what you may just need is some good old fashioned business advice. There are ways to protect your business from such economic changes.
But who do you go to? It should be a company or professional adviser who has been through a credit crunch before, one which has thorough market knowledge and experience.
Make the most of the systems and resources available to you, to give yourself as much room to manoeuvre as possible
Make the most of the systems and resources available to you, to give yourself as much room to maneuvre as possible. Looking at business finance, planning, costs, marketing and your professional advisers, the following should help you on the road to beating this ‘squeeze’ and protect your business.
1. Plan Ahead
Failing to plan is planning to fail.
It is vital that you have contingency plans in place so you are prepared for any kind of economic change. Plans should be considered for buoyant markets, downturns and also for when things are just plain average.
Following this philosophy, you should have no need to panic in times of change and your business should remain stable and continue to grow.
Small businesses tend to put such planning on the back burner; it can be seen as low priority in relation to making sales, purchasing stock, managing staff and all the general day-to-day tasks.
“This is completely understandable,” I hear you cry. “I have no spare time, I hardly have time to sleep let alone plan for whether it may rain or shine sometime in the future,” you might add.
Entrepreneurs tend to follow their gut feeling, their instincts. Your know-how is what manages your business, but sometimes this may mean sticking to what you’re good at.
When tough times rear their head, having a plan of action and the right systems in place can make or break your business and you may need to step well out of that comfort zone to succeed. Plan for the short-term, mid-term and long-term, and build flexibility into whatever you plan. Be realistic.
2. Be Flexible
Deal with more than one bank.
Arrange your financial affairs with more than one bank so you don’t have all your eggs in one basket. You can have your current accounts, loans and overdrafts all with different institutions and your asset finance somewhere else – this will help maximise your finance options.
If one bank stops lending, you can go to the others, and if one is offering high rates, you have other options of where to go – choice in the market is what you need.
You will have more negotiating power and maximum borrowing potential using this strategy. You can also use different asset classes such as Hire Purchase for equipment factoring or Invoice Discounting for your debtor book.
A typical scenario right now is that an entrepreneur will go to their bank and expect to be offered a good deal on a loan, especially when they’ve been banking there for years, but more often than not, the bank can’t help because their criteria are too tight. It just cannot be assumed that relationships with banks will remain unaffected by the credit crunch.
The entrepreneur will then find a commercial finance broker but it may be too late. Brokers can help you find the best finance for your individual circumstances by searching the market on your behalf.
Their comprehensive knowledge of the market can help you spread your money and your options to give yourself more chance of success.
3. Manage Your Costs
Do something different.
How often do you check your costs? Which costs can or should you reduce?
You may not think it’s necessary. Let’s say you’ve set up the best deals with all your suppliers, your marketing works for you and you have a decent turnover – so if it’s not broke, why fix it?
Most businesses and their employees are resistant to change; we can easily get caught in a comfort zone, we like things to be familiar.
