Blogs / Financial Planning
Crunch Time - Business Grit When the Chips are Down
Article Written by Jannie Rossouw
It’s 2 a.m. and sleep escapes you, cash flow is tight, clients have gone quiet, and doubt creeps in. When the chips are down in business, every decision matters, and how you respond can define your future.
Business and economic cycles come and go. Business sentiment can be negative. The question is if we see the glass as half full or half empty even in the toughest economic times. The intent of this article is to provide you with some food for thought to help you navigate the business maze when the “chips are down” for your business.
There are tell-tale signs that your business is heading down the path of distress.
These may include:
- Economic and industry trends pointing towards a slowdown in business activity.
- You are uncertain about the strategic direction of your business.
- Payments are delayed, and non-payments are escalating into bad debts. You may also notice a worrying decline, or complete halt, in repeat orders from existing clients.
- The sales cycle might point towards a situation where you receive less quotes and a decreased conversion rate on quotes.
- The cash flow of the business is strained as you struggle to meet your obligations, and you find yourself in a situation where you are paying your creditors late.
- Identified business risks come to fruition as the probability of it happening increases.
These events may have an emotional and physical impact on yourself and your staff
Potential impact on the business owner:
- Denial – This cannot be happening to me/us
- Anger – Why me/us, we are working so hard to make this business work?
- Loss of confidence – Maybe we are not good enough?
- Tired – Do I still have it in me to move forward?
- Fear and anxiety – If I/we cannot see this through I/we can lose everything we worked for and also our employees and their dependants.
- Isolation – I need to carry this burden alone, I cannot show weakness.
Potential impact on employees:
- The best employees usually “jump ship” first if they have a sense that the business is distressed. Employees may also start to speculate about the standing of the business as a going concern.
- You might decide not to fill vacancies to save cost which leads to more overtime needed from existing employees , this is not productive in the longer run.
- Employees can become unmotivated.
- Employees might fear to lose their jobs.
- The situation may lead to distrust between the owners, managers and employees.
There are several ways to address the situation whilst you are working on a solution
When times are challenging, we need to be level headed and not try to resolve it alone. Use all resources which are available to you.
Speak to your SFP Financial Adviser
Focus on Finances:
- Negotiate with creditors to extend payment terms.
- Have an open conversation with your bank and financiers about the current situation and show them what you are doing to address it.
- Keep your insurance premiums up to date or negotiate a premium holiday. You do not want to “add insult to injury” if you have an unplanned incident or if a key member of the business dies or become permanently disabled
Focus on people:
- Create an open communication forum with all employees. Give them the facts and tell them what you are doing to address the situation.
- Keep them informed about the progress made.
- Make them part of the solution. Ask them for input from their perspective. They are mostly closest to clients and the marketplace. They might see things you miss.
The Plan:
- Cost management needs to be stepped up.
- Protect the current income streams of the business.
- Focus on the marketing efforts which you know from experience brings in the most new business.
- It is also paramount to ensure that you retain the current book of clients.
- Operations need to be streamlined. Arrange for overtime when needed. Measure and manage the productivity of staff. You need to know that the contribution of every staff member is supporting the bottom-line.
- Get all “hands on deck” and get expert help if needed.
- When times are good, we have the opportunity to futureproof the business.
- Build up a cash reserves (3 – 6 months’ worth of funding to carry the business through a tough patch)
- Diversify the client base and revenue streams to be less dependent on a few big client accounts.
- Develop a Plan B which includes a Risk Management Plan and Business Continuity/Crises Management Plan
Liked this article?
Share on social media
.
Want to discuss points raised in this blog post? Contact Johann
Looking for expert advice?
Speak to a financial planner
| Johann Engelbrecht Sanlam Financial Planner 0824360838  |
Blog
Related Articles
Swipe left and right to view a related blog article or click here to view all
The 10 silent killers that can close your business
Employees: Achilles Heel or differentiator?
Insecurity Can Lead to Insight
Reconnect, Recalibrate, Rejoice
Five Financial Challenges Faced by Enterprises and How to Overcome Them
Don't waste your time living someone else's life
The most valuable enterprise you'll ever manage
What to Consider When Selling or Buying a Business
Get expert financial advice
Speak to us now and get advice from an accredited financial planner.
Speak to a planner