Growing a small business is a tough journey that comes with many ups and downs. You’re bound to make mistakes, experience a few unlucky streaks, and have to face circumstances beyond your control.
Some problems, however, are bigger than others. That’s when you find your enterprise facing a financial crisis that could have you losing everything you’ve worked so hard to establish. Whether it’s having to deal with the aftermath of a major disaster such as a security breach or finding that your current business strategy is not bringing in enough revenue, responding to a financial crisis calls for a level head, first and foremost.
Don’t panic, get ready to act. Here are the key tips to help you manage this situation, preserve your business, and come out the other side stronger and smarter.
Examine the situation closely to establish a plan
The numbers tell you that you’re facing a financial problem, but numbers alone are not enough. You need to get to the bottom of it and diagnose every aspect of the problem so that you can act accordingly. This preliminary stage of examining the company’s current position and identifying the core issues that contribute to this crisis is a crucial stage in the process of recovery.
Although you need to act quickly, don’t rush this part because you’ll risk losing perspective and overlooking some less obvious contributors to the problem as well as potential solutions. Deal with the emergencies first to stop the bleeding. Then take your time to come up with a step-by-step plan for rescuing your business out of this situation.
Find where you need external help – and get it
When it comes to critical situations in business, one of the gravest mistakes an entrepreneur can make is not understanding his/her own limitations. This is a time when you need the best people to help you make important decisions and offer solutions, so don’t hesitate to bring in outside expert services.
For example, you’ll certainly do better with the previous step if you hire a professional to perform an audit, diagnose the problem, and recommend solutions. Or, for example, if you’re facing a significant revenue loss as the result of a communication/marketing mishap, partner up with a professional marketing agency to look for possible solutions.
It will certainly be a worthwhile investment, so don’t use money as an excuse to not get help. You can consider funding your small business with a loan from digital lenders to help you bear through this critical time and hire the experts you need.
Optimize your team
When hard times hit, you’ll have to make some tough decisions and let some people go. You might hope that the crisis hasn’t hit that hard, but the reality of the situation is that in a critical situation of any scale, every employee that doesn’t bring value to your company is costing you more than money.
They’re trumping the efficiency of your operations, slowing the entire company down at a time when you really need to be at your maximum – not only to keep up with operational demands but to exceed them and swim out of the crisis.
Unfortunately, you might find that the least productive and least efficient people are those you’re somewhat closer with – perhaps friends, family, or old colleagues. That makes it all the more difficult, but it’s only fair when you need to make cuts to save your business.
Cut the unprofitable projects
The “work smarter, not harder” motto really applies well here. You might think you need to take on more projects and that you’re not in a position to refuse any kind of work, but what you actually need to do is prioritize the projects that generate the most revenue.
Double down on the projects that are generating the most revenue right now and make sure all your best people are working on them. Get in touch with your best clients and offer to do more work of them, or to expand on an existing project to make it even more profitable.
You might also have some projects that are set to be profitable in the future – in a couple of years, perhaps – but aren’t generating any revenue currently. You’ll have to be very careful here and consider the risk and reward. These types of projects drain your budget, and you might not be in a position to withstand it.
The takeaway: Don’t repeat the same mistakes
Facing problems and finding creative solutions is all a part of being an entrepreneur. Don’t beat yourself up over the mistakes you’ve made or go to another extreme and seek blame in everything and everyone other than yourself.
Seek advice from experts and the people you trust to help you examine the situation objectively. The best thing you can do is to learn from every mistake and the hardships you’ve had to face.
In the future, you’ll be able to recognize more easily the minor setbacks that may lead to a similar crisis. Use these experiences to improve your business and be better prepared for what lies ahead.