Are you prepared for the fire? Will your business go on if you lose your building and contents to fire? Or, what if your partner dies? How will your business be financially affected?
As much as we don’t like to think about these disasters, they seem to be happening too frequently and businesses go under. Small businesses are more vulnerable to these conditions as they have fewer resources to deal with. But, as a business, you need to think about it.
The latest economic downturn was a disaster for many small businesses as they were not prepared financially to deal with the decrease in spending that resulted in reduced revenues. Companies were not prepared, did not make the right moves early enough to adjust and eventually closed their doors. How do you prepare for these eventualities?
Here are 4 cautionary steps to take:
- Monitor your cash flow – keep a spreadsheet or use your accounting program to track your immediate and long term future. What are your projected revenues this month, next month, six months from now and even longer? Gauge those against your expenses and look at it weekly, adjust if necessary and discuss with your financial people. The longer the term, the less frequently you need to look at it, just don’t neglect it.
- Are you running your business as efficiently as you can? Expenses are a constant problem. Look at your payroll and make sure everyone that is billable is earning their keep. Do you have extra people on your staff that aren’t necessary? Are any not producing the required revenue per employee? Are you paying for space that you are not using? Lease it or take it off your lease. Look at all your vehicles and sell any that are not generating revenues.
- Sales and marketing dollars are the hardest to figure out. You want these dollars spent with the greatest return on expenditures. Often times these are the hardest to determine the return. Don’t leave any potential marketing method out. The newer methods are economical, i.e. social media, email, blogs, etc. But don’t discount the old methods (direct mail, sponsorships, advertising). Know who your target market is and what the best method of connecting with them is. Spend these dollars wisely and timely. Monitor the return.
- Using 1 through 3, build your cash reserves. This will give you the cushion you need for any impending sudden change in your business.
Running your business at peak performance is the best insurance policy you can have (make sure you still carry insurance though). Look at it at least weekly and make sound business decisions that will assure your survival. This may require you to remove the emotions and feelings out of it. Be cautious of developing “special” relationships with your employees that keep you from making business decisions. It’s nice to keep someone on because they have a family, their nice etc., but these can destroy your business in the longer term and they’ll still be out of a job.
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