If access to money is all you need, and the core demand is still sound, consider these five strategies.
1. The future impact on cash flow
How will the crisis impact the week-to-week cash that flows in and out of your business? Sketching out a number of cash flow scenarios will identify what could happen in the future to help with risk management and deciding what level of funding needs to be considered. Run a number of cash flow examples where sales drop (or cease) over a period of time.
For these scenarios consider:
- Costs you will no longer have
- Extra cuts you can make
- The impact on gross profit and margin
- The revenue you need to break even
- The length of time it takes to recover.
Each reduction in sales will have a corresponding fall in variable costs (materials, cost of goods sold), but at some stage you may find it’s uneconomic to continue with certain products and services if the fixed costs are too high. In these cases, you may have to lower your overall cost base (possibly making staff redundant, move premises, or close down less profitable product lines).
2. Trade out of trouble
If you’re determined to keep the business intact there are some things you can do to increase the chance of surviving. Initially focus on doubling down on your repeat customers to make sure their needs are met before anyone else’s and explore ways you can upsell or cross sell to them. Then contact the rest of your customer database with phone calls, emails, physical or virtual visits, social media or e-newsletters with special offers to cross-sell or up-sell to other product lines.
Next, look for wider opportunities to increase sales as some industries or markets will be doing better than others.
There are a number of ideas you could investigate including:
- Approaching new customer segments
- Diversifying by branching into new products and services
- Moving parts of your business online
- Marketing in regions traditionally outside your area
- Selling through online marketplaces
- Using social media sales platforms (Facebook, Twitter, Instagram, Pinterest, WeChat, YouTube etc)
- Partnering or collaborating with other businesses.
3. Re-structure your business
Think about the parts of your business that work and reinvent or re-structure the areas of your business that are struggling to adjust to the new normal. Take a close look at what can be salvaged and then act like a new start-up to build a new, stronger business on the foundations of the old one. What would you do differently, and how would the business look?
You may want to:
- Delete unprofitable product or service lines
- Close down parts of the business that no longer contribute
- Sell or lease assets not needed
- Change the expertise mix of your staff (possibly letting some go)
- Invest in new research and development.
If you can, establish one or more identifiable target markets and then design your business around providing an exceptional service offering in that area. Customers will still need to know what is special about your business to set you apart from your competitors, so try to differentiate with unique products and services.
If you decide to restructure, gain as much business advice you can from your advisors, existing staff, industry experts and those you trust. Validate your ideas by searching the internet, subscribe to industry news, visit business association sites and talk to suppliers to validate your ideas.
4. Sell and move on
If you’re thinking about selling your business, it’s crucial to first work through the details that will help you maximize your price and make your business more attractive to potential buyers.
To reduce the risks involved in selling a business, consider employing experts like a business broker to help guide you through the steps. They will help prepare the business to sell, put the business on the market within their channels, through to completion of the transaction and handover.
It’s a good idea to talk to your accountant, lawyer, banker, business partners, family, or other business owners you rely on to help with your future business decisions.
5. Review the state of your supply chain
It won’t only be your business that’s impacted by a crisis. Outline what’s happened to the key suppliers you rely on and identify risks to your business if they were suddenly no longer able to deliver. This is especially critical if you have exclusive or hard to replace materials or products as part of your own delivery to customers.
Develop an alternate supplier plan and consider reaching out to these businesses as back-up if your existing supplier can’t deliver.
6. If you have to raise extra capital
Before you start to borrow and add to any existing debt, you may be able to free up cash within your business to tide you over. There could be machinery that you no longer need, or vehicles you use on an infrequent basis, which could be sold and turned into cash. These could then be leased back when you need them.
Other ways to raise extra working capital include:
- Selling parts of the business
- Liquidating excess inventory or raw materials
- Re-investing your own capital
- Finding external investors.
Look closely at the business assets on your balance sheet to see what you don’t need and convert as much as you can to cash without handicapping your core business.
Regardless of what actions you have taken or will take, document the changes and reach out to your bank and investors as early as you can to help find the right support for your business.