Opening the doors to your business is an exciting time. Keeping them open is a little different story. You do not have to be a college graduate, a business major, or even have graduated high school. What you need is an idea, common sense and the ability to surround yourself with people smarter than you.
Small businesses, the backbone of our capitalistic system, constantly experience challenges. You need to have the foresight to face those challenges and deal with them as they occur or prevent them where possible. There are many red flags along the way and you need to recognize them. And not give up.
For instance, cash flow and receivables need to be constantly watched and monitored. Are sales dipping and why? With all the computer technology we have today everything can be monitored and tracked. Take advantage of it and make sure if you do not understand it you have someone on your team who does. As a businessman you have to be proactive and head problems off before they become an issue.
There are two main factors that many businesses under estimate before they open their doors. The first one is under estimating how much capital they need to get through the first few months of operation. The second one is not actually understanding their product or operational costs. Without knowing these two things a small business is in the hole from the beginning. Once your doors are open these two factors become a reality.
So you have opened your doors and you realize you have done both – under estimated your capital and your cost of doing business. What do you do? Depending on your business, you do have options. For instance, almost every business has receivables whether you are a service business or sell products. Since you need cash flow you need to look for alternative types of financing. It would be great if you could go to your bank and get an additional line of credit but that is unlikely until you have a track record.
So now you need to look at things like accounts receivable financing, factoring or expensive short term loans. Are these available? Absolutely. Are they expensive? You bet!
But so what? You need to save your business from bankruptcy or worse. There are also certified business restructuring firms that will not charge any upfront fees and will help reduce debt level in order for you to keep your suppliers on board if you are manufacturing a product. In many cases they can reduce your debt between 30% and 80% in order to keep an ongoing relationship with your suppliers.
The key to saving your business is to use bankruptcy, either Chapter 7 or Chapter 13, as a very, very last resort. Keep your dream alive. Look for alternatives and do not give up.
By Jerry Mohr for the 50 Plus Report