Jonathan Chadwick, Commercial Litigation Partner at Stephensons Solicitors LLP, provides his top ten tips for business owners struggling to stay secure in the current financial climate:
1. Treat Cash as King
This is your first priority. Daily monitoring is worthwhile over the next years of recession, as a lack of money is why businesses fail over any other reason.
2. Monitor your business against a plan
Monthly revisions are a good method for reviewing your constantly changing financial security. Be clear what your key performance indicators (KPIs) are and adapt them if necessary.
3. Hold regular team meetings
Brief weekly meetings, orientated around current performance results, are a useful tool for development, delegation and maintaining focus on business KPIs.
4. Regularly update cash-flow forecasts
This is especially critical if you have a seasonal business or if you have to make occasionally large cash payments. Once again, careful noting of all financial matters is key to survival.
5. If there is a conflict between profitability and cash-flow, take the cash-flow option
This may be difficult to do but remember a business ceases to exist when it runs out of money. Make sure you can meet the next payroll or satisfy creditors demands for payments of essential supplies above all else.
6. If you have a loan or overdraft, be aware of any covenants
Covenants are the rules that the banks attach to bank borrowings and are based on a series of controlling financial ratios. Breaking covenants could result in a painful loss of your business to a bank’s beckoning hands.
7. Research new sources of finance
With new lending options springing up across the financial sector, take time to investigate whether there are better financing options available for your company. Be sure to not break the contractual arrangements already set up with your current lender.
8. Know your customers
Why do they buy your product? What do they think of it? What is their lifestyle? Questions like these can be incorporated in an up-to-date consumer profile for your business. Understanding the needs of your customers is key to keeping your products fresh and in demand.
9. Do not stop marketing
Other companies may start to limit their marketing during budget constraints, but now is the time to get your product noticed. Well designed marketing schemes can generate new avenues of business and establish a wider customer base that can compensate for a dip in consumer spending.
10. Clean house
It’s not an endearing prospect, but removing parts of your company that have outgrown their usefulness can save valuable finances and build a cushion for long-term uncertainty. Be sure to adhere to redundancy regulations and proper dismissal guidelines, as cleaning can quickly becoming costly if not handled properly.