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Running your Business in a Financial Crisis
The financial crisis which became apparent in the closing months of 2007 and early 2008 has its' root in years proceeding as far as a decade ago. During a period of financial crisis, small scale businesses are often the ones hard hit with little hope of rescue. For most of these businesses, the only real option is to cope and waddle through the crisis or face bankruptcy. With the incomes and upkeep of a sizeable number of families resting on the shoulders' of a business owner, running a small business in these times isn't the easy task. Still, many businesses will stay afloat and live tell the tales provided they face the crisis fully equipped with knowledge and creative ideas. Business owners, executives and every other individual wishing to up their knowledge base on survival tactics a business can use to its advantage during a time of crisis should be happy reading the following suggestions.
Prepare a Cash Flow Projection
Cash flow projections are normally created to estimate when a business will encounter its own financial crisis. It so often happens that the sun wouldn't shine all year round and some periods of the year may see the business experience cash shortages.
From helping a business during a period of its own financial crisis to that which we currently experience, cash flow projections are a very useful tool for small business owners who love to plan ahead. Getting to know just when your business might hit the rocks could help one prepare before hand so as to minimize effects of the financial crisis.
Be Ready to Cut Prices
With increased consumer fear comes less spending. This means you might want to consider cutting down rates to persuade customers to your door steps once again. A price reduction strategy could see all product prices reduced, or in some cases, a few products (for example, those producing higher profits) could have their prices reduced. Using this strategy, customers are attracted before of low interests on few best selling products, but may divert to purchasing other non-discounted items.
Do Things Cheaply
Internal operations should be reviewed for efficiency and maximum turn-over. Business meetings could be merged and arranged during the same period so as to save traveling costs, while not so important meetings could be teleconferenced. Freebies originating from the business and not a supplier tied to the product should be eliminated to cut costs.
Sharpen your Negotiating Skills
Negotiation skills often come to play when trying to afloat in a crisis.
- With Suppliers
Suppliers are sometimes lenient and more willing to provide a form of extended credit in form of service without payment to the business. A suppliers' customer is the business and they're unlikely to want such income stream go down the drain. Negotiating with your suppliers can help defer payments from a few days later to weeks later. This gives the business ample time to get through a cashless period and pay the supplier when things improve a bit.
- With Habitual Customers
Depending on what area the business is into, it's often possible to negotiate early payment with the regular customers. Instead of choosing to accept payment over time or through a credit card, cash payments should be enforced and discounts given on early payment.
- With Lenders and the Landlord
Now's probably the time to renegotiate deals struck with those providing credit to the business. Loans are usually negotiable by business owners, thus providing an opportunity for owners to lessen the debt burden during a period of financial crisis.
Landlords are not always cooperative to the fact of accepting reduced pay but yet, they should accept to help your business survive since its bankruptcy and the general economic situation do little to help find another tenant.
Have an End Game
Having an end game falls anywhere between having a bunch of back-up suppliers in case the usual ones encounter problems of their own to incurring the services of a crisis management team. Business owners should always have a back up plan incase everything goes worse than expected.
Running a business in times of a financial crisis is never an easy job. It requires strong management skills and a great deal of creativity in order to keep the business growing.
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