No matter the size of your business, you should always have a positive cash flow in order to run a successful business. In short, cash flow means the amount of money you have coming in and going out from your bank account. This includes all sales you get in, as well as all expenses (such as rent and salaries) you pay. Sooner or later, a business encounters harder times. Perhaps it is a dip in sales, increased expenses, or other problems. Regardless, you have to have a plan for how to combat it.
Reza Shojaei is the owner of a multinational business called Value Marketing. Today, he will give more insight into what kind of solutions small businesses can lean onto, should they ever encounter hard times.
Preparation is always key
Each business should always have a financial plan that includes also what they plan to do in case something goes wrong. Sometimes, businesses may come across situations that are completely out of their control. Such situations are much better handled when the business already has a standing plan for it.
- The most important thing that small business, or a big one for that matter, can do is to make sure they always have a backup plan. At the end of the day, you never know if something goes wrong, and you simply have to be prepared for it, says Reza Shojaei.
Value Marketing is a business that operates in 12 markets at the moment. For instance, online casino Canada market is under one of Value Marketing’s brands.
- We always look ahead. Financial projections should be made a few months ahead of time when possible, so you can easily see if there might be a dip in sales for one reason or another. However, that is not always enough: sometimes you might come across things that you cannot control, Shojaei adds.
In an ideal situation, any business should have at least a few month’s worths of cash or liquid assets they can use to boost their cash flow if needed. This way, they can easily ensure the success of their business even during harder times.
What can you do if the preparation does not help?
Through proper preparation is always the best thing you can do, sometimes it is not enough. Hard times may hit harder than projected, or there may even be outside forces that simply prevent the business from running as planned. For instance, the coronavirus pandemic in 2020 caused many businesses to close their doors. When there are no sales coming in, it is hard to keep the cash flow going.
In such a situation where, despite your preparation, cash flow is still slow, you can look into loans, grants, and credit cards. Sometimes, you may even be able to rearrange bills and expenses, push them back, or pay them partially or with the payment arrangement.
Taking a loan may often be the most beneficial, fastest, and easiest thing you can do. However, taking a loan should always be properly planned out and you should never take a bigger loan than what you are able to pay back. After all, a loan can easily turn into a liability. Credit cards may offer more flexibility, but they should still be treated as regular loans and only apply for one when needed.
Some governments may grant loans, grants, or stipends to small businesses. These kind of grants are oftentimes not available quickly, and they have certain dates when you can apply for them. Thus, these are things you should look into early.
Rearrange bills and make payment arrangements
In some business models, you may need to buy inventory in advance to get something to sell. While the best thing to do is to pay for the whole inventory in advance, sometimes you may be able to negotiate the bill to be sent to you after a month or so. This way, you may get some more leeway to sell the inventory before you have to pay it to the distributor.
Also, certain bills and payments can often be put on a payment plan. An arrangement as such can help a small business manage their cash flow better and even get back on track easier and faster.
The best way is to take the bull by the horns and write down all the expenses that are due immediately, or that are at the top of your list. See what can be rearranged, pushed back, or put on a payment plan. Taking a loan to cover the slow months may then become worth considering.
In conclusion, a small business (as well as big ones) should do proper preparation work and plan out financials in advance. Also, having a backup plan allows the business to continue seamlessly even during hard times.