Every business goes through financial problems at one time or another, whether due to internal problems, market changes, or large-scale external crises. At the moment, many businesses are experiencing financial issues due to circumstances that are much bigger than themselves.
However, times of financial difficulty also represent an opportunity. Businesses can use financial crisis to learn from their mistakes, identify their strengths and weaknesses, and emerge stronger than ever and ready to face whatever will be thrown at them next.
Here’s how your business can learn from financial problems and emerge stronger than ever before.
Be Cautious
Financial problems can blind-side your business, appearing from nowhere and threatening your business’ very survival. When these problems, big or small, suddenly come up they make one thing very clear: preparation is everything.
Businesses that are cautious even when times are good, make conservative decisions and put some funds aside for a raining day are in a much better position to deal with problems when they come up. On the other hand, if you overspend, over-extend and take too many risks when times are good are not prepared to deal with financial problems when they emerge.
Ride the Storm
Part of being prepared for whatever may hit your business is understanding that every business has its ups and downs. Your business will go through good times and bad times and often there is nothing you can do about that, other than wait out the bad times and be ready to hit the ground running once the crisis passes.
Rather than trying to skim through or disregard your financial problems, especially those caused by external forces, sometimes it is better to expect that your business is going through a low patch and wait for it to pass. This is the ideal time to reinforce other aspects of your business, working on improving your team’s skills, and be stronger than ever to address the next challenge.
Be Innovative
Financial issues and problems mean that you have to dig deep. The status quo might not be enough anymore for your business to be successful, so you need to get creative and come up with new strategies to carry your business through. This might involve taking an internal audit of how your company is operating and shifting processes, or up-skilling staff.
Innovation can also help to improve you marketing and bring in more revenue. Come up with creative marketing strategies to increase your customer base and build your brand. For example, you could try innovative marketing tactics such as Stickerit stickers, launch your business on new social media platforms, or create new types of online content to reach a wider audience.
Have Backup Funds
We have already touched on the importance of being prepared for financial problems, but this one is so critical it is worth expanding on. In being well-prepared, it is absolutely essential that every business has an emergency fund put aside. This should be something that you build up when times are good, and – most importantly – don’t touch until you absolutely need to.
Your emergency fund should be enough to allow your business to survive for a least a few months even if you have little or no income. Not having an emergency fund set aside will mean that when financial problems inevitably hit, your business will not be able to keep functioning as normal. In such a situation, you’ll need to scale back and likely furlough or fire staff just to keep afloat. With decreased capacity, it will become harder and harder to address growing challenges, putting your business in a vicious cycle.
Diversify
Another lesson that becomes starkly evident during times of financial crisis is the importance of diversity. Businesses with multiple income streams are less impacted by external financial problems, because there is more chance that one of their incomes streams will continue to perform well even as others falter. This is why it is critical that businesses diversify their income in order to be as successful as possible while times are good, and survival as well as they can when things hit the ropes.
The same is true when it comes to investors for your business. If you are relying too heavily on a single investor, you could be adversely affected if an external crisis comes along and the investor needs to withdraw their funding. In fact, relying on a single investor means that if something localised happens to that individual you’ll lose all of your funding. Instead, you should seek investment from multiple sources to manage this risk.
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