In these turbulent economic times affecting all businesses, I'm frequently asked how a small business owner prepares for, or handles, financial situations like the one we are now facing.
While there are no quick answers, there are strategies that you can put into place right now to strengthen the bottom line of your business. Unfortunately, for some businesses, there will be a loss of income to some extent.
A client may decide to eliminate a program or cut a budget. Their sales cycle may affect your sales cycle. We have to plan for these potential losses in income to our business.
Let's look at a couple of strategies to shore up your financial resources and build your cash reserves while we ride out this rollercoaster. To plug the holes in your financial bucket, you need to determine where those leaks are, if they can be eliminated and how your business would survive a catastrophic event.
Reviewing your expenses
The first task is to sit down and review all of your expenses. You'll have fixed expenses, which usually can't be cut, and discretionary expenses, which can be reduced or cut. I like to call this the life boat drill.
Let's start by listing each expense, determining if it's fixed or discretionary. If it's a discretionary expense, you need to ask yourself, “Do I absolutely need this expense or can I reduce it or cut it out of my business?” It's time to get tough with yourself, your business depends on it.
Look for unknown and unnecessary expenses. Some unknown expenses can be automatic debits from accounts that you've lost track of.
There could be expenses you can reduce, like interest on your business credit card. There may be fees that you no longer require. Search them out so you can determine how you'll handle them.
Building cash reserves
Our second task is to start building reserves of cash in different places. You'll want to have cash that can be quickly accessed if needed. That may include having cash on your business premises in case of emergency.
What will you do if your area loses power? What if you can't get to your bank's ATM machine?
We are a society used to offering up a plastic card instead of paper money. Having an adequately protected cash reserve on your premises could get you through an emergency.
Brainstorming the “what if” scenario
Lastly, if you don't have a financial advisor, pull some of your close friends together for a brainstorming session. Play “what if.”
What if you lost 20 percent of your clients? What if you suffered a medical emergency? What if we had a disastrous earthquake?
Support each other in developing strategies for your business continuity in these extreme situations.
It's never too early to start planning to rein in business expenses. Look for those unknown and unnecessary expenses by reviewing your current, fixed and discretionary expenses.
Determine what expenses can be reduced or eliminated and create a cash reservoir. Follow these tips and you'll be better prepared to weather the storm.
Robert J. Clark is a principal with the Wealth Strategy Group, where they will educate, motivate and empower you to take control of your finances and achieve your financial dream. Clark can be reached at (760) 930-9433 or www.wealthstrategygroup.com.
The Wealth Strategy Group:
5963 La Place Court, Ste. 306, Carlsbad
(760) 930-9433
www.wealthstrategygroup.com
While there are no quick answers, there are strategies that you can put into place right now to strengthen the bottom line of your business. Unfortunately, for some businesses, there will be a loss of income to some extent.
A client may decide to eliminate a program or cut a budget. Their sales cycle may affect your sales cycle. We have to plan for these potential losses in income to our business.
Let's look at a couple of strategies to shore up your financial resources and build your cash reserves while we ride out this rollercoaster. To plug the holes in your financial bucket, you need to determine where those leaks are, if they can be eliminated and how your business would survive a catastrophic event.
Reviewing your expenses
The first task is to sit down and review all of your expenses. You'll have fixed expenses, which usually can't be cut, and discretionary expenses, which can be reduced or cut. I like to call this the life boat drill.
Let's start by listing each expense, determining if it's fixed or discretionary. If it's a discretionary expense, you need to ask yourself, “Do I absolutely need this expense or can I reduce it or cut it out of my business?” It's time to get tough with yourself, your business depends on it.
Look for unknown and unnecessary expenses. Some unknown expenses can be automatic debits from accounts that you've lost track of.
There could be expenses you can reduce, like interest on your business credit card. There may be fees that you no longer require. Search them out so you can determine how you'll handle them.
Building cash reserves
Our second task is to start building reserves of cash in different places. You'll want to have cash that can be quickly accessed if needed. That may include having cash on your business premises in case of emergency.
What will you do if your area loses power? What if you can't get to your bank's ATM machine?
We are a society used to offering up a plastic card instead of paper money. Having an adequately protected cash reserve on your premises could get you through an emergency.
Brainstorming the “what if” scenario
Lastly, if you don't have a financial advisor, pull some of your close friends together for a brainstorming session. Play “what if.”
What if you lost 20 percent of your clients? What if you suffered a medical emergency? What if we had a disastrous earthquake?
Support each other in developing strategies for your business continuity in these extreme situations.
It's never too early to start planning to rein in business expenses. Look for those unknown and unnecessary expenses by reviewing your current, fixed and discretionary expenses.
Determine what expenses can be reduced or eliminated and create a cash reservoir. Follow these tips and you'll be better prepared to weather the storm.
Robert J. Clark is a principal with the Wealth Strategy Group, where they will educate, motivate and empower you to take control of your finances and achieve your financial dream. Clark can be reached at (760) 930-9433 or www.wealthstrategygroup.com.
The Wealth Strategy Group:
5963 La Place Court, Ste. 306, Carlsbad
(760) 930-9433
www.wealthstrategygroup.com