Running a business in times of economic prosperity is a challenge at the best of times, only 1 in 10 businesses make it past the first 12 months but in times of high taxation, high running costs, recession and lower than normal expendable income it becomes a real challenge. We’re going to take a look at some of the biggest challenges facing business owners and what can be done to get through them. The key thing to remember is that whilst time may be tough now, they always go in cycles so if you are struggling just focus on surviving until the country start to grow again and inflation goes down.
Focus On Cashflow Above All Else
One of the biggest issues most businesses face is cashflow, the bills keep on coming but you’re waiting for payment from customers/clients. Don’t be afraid to set payment terms that suit you, if you need 14-day payment terms then don’t be afraid to ask for it instead of agreeing to 60-day payment terms in fear that you might lose out on account because if you don’t get paid quick enough and can’t afford to pay your bills then you might as well not have that client at all. There are also a number of invoice factoring companies who will pay you the money you are owed up front and chase the repayment themselves, in return however you will need to pay a fee which could either be a set fee or a percentage of the money you have taken. If cashflow gets really bad but your company is fundamentally solvent and a valid business, a CVA (company voluntary arrangement) could suit your business.
Minimise All External Contracts & Pay As You Go
The key to surviving in uncertain times is flexibility so if you have taken on a new premises don’t agree a 10 year lease that you’re tied to, try and do as short a lease as possible and put break clauses in it. In this kind of market the likelihood is that there will be lower demand for property which means you have a better negotiating position with the landlord. This applies to everything else as well, broadband, cleaners, bin companies, you name it you can often negotiate contracts that are rolling monthly or are short term so that if you do need to cut something from your expenditure you can do. You will often have to pay more to have a shorter contract but it will give you more peace of mind overall.
Don’t Overstaff Your Business
One of, if not the biggest type of expenditure for any business is staff. It can be easy to want to be the nice boss and keep people on because you feel bad about making them redundant but if the work isn’t there for them you have no option, if you keep on paying them you just risk your business going under which then puts even more people out of work. The best thing to do is be honest and if things are getting bad let them know it might be a good idea to look for another job before you have to make them redundant. If you are on the other side of this and have been made redundant and are struggling to pay your bills look for IVA advice as this could be a valid route.