Although it seems that the economy is doing well, inflation is still an issue to reckon with, and, in certain sectors, it might be difficult to hire new employees. Consumers are expected to cut back spending amid higher interest rates and lower real incomes, and they may cut back on some purchases.
Some companies are struggling to stay afloat and may consider bankruptcy.
So what steps can you take to avoid bankruptcy and fix your company?
Evaluation, Damage Control and Action Plan
First, list the challenges you face and solutions you might think of. Then, map the workflow and workload in each department, prioritize the steps you have to take, and re-evaluate the costs and benefits of each step. Having a detailed written business plan or a roadmap is key. Remember, it must include information on sales and marketing, operations and financials. Many business owners think that simply maintaining a spreadsheet with a budget is enough to keep them out of trouble, but nothing is further from the truth. In these situations, you need to evaluate all areas of your business, look at what your competitors are doing, and evaluate your product or service offerings and the value you offer to your customers. Going beyond just a spreadsheet and into the details is extremely important.
After writing your business plan, you should begin executing on the following:
Step 1: Control cash and cut unnecessary costs by:
- Creating a daily cash-flow report (A must!)
- Approving each expense before it is spent
- Collecting your accounts receivables as quickly as possible, and offering cash discounts for faster payment (it is usually cheaper than paying your bank for a line of credit)
- Delaying payments to your vendors – most of your vendors are in the same boat, so work out a payment plan that both sides can live with
- Considering switching to lower-cost vendors for essential services and supplies
- Evaluating your staffing needs and keeping (or re-hiring) only employees who are bringing in, making, or servicing sales
- Reviewing all products or services offered to eliminate unprofitable solutions, and reduce the cost of production or service delivery
- Informing all employees of your actions and asking for their support after implementing these cuts
Step 2: Meet with key personnel and your Board of Directors or advisors:
- Form an advisory board that will help guide and support you through the restructuring of your business and the turnaround process
- Bring your key employees together to have a candid discussion on how to rebuild the company — ask for their cooperation and seek advice based on their expertise
- Always share the reason for changes with employees. Informed employees will cooperate with you to save the company and their jobs.
When going through these steps, it is important to always be prepared. Do not go into any meeting – with anyone – without a plan. People lose confidence in leaders who lack a plan and vision for their business. You should always be self-assured, yet open-minded and flexible, and be open enough to share your plan with investors, management and key employees.
Following these first steps should get you back on your feet and on your way to success. In my next post, I will continue to lay out the action plan – specifically on how to deal with customers, vendors and tax authorities.