The media likes to concentrate on success stories in business: Jeff Bezos and Amazon, Tim Cook and Apple, even Elon Musk and Tesla. But one of the sad things about the market system is that there are both winners and losers. Some winners win big, and they are celebrated in magazines and journals all over the internet, but many “lose big” as well, giving up their time, resources, and savings, only to fail.

Nobody wants to have a failing small business on their hands. So what can you do to turn the situation around?

 

Talk To Creditors Early

Many CEOs realise that they are in trouble well before their creditors do. The accounts don’t add up, and the financial situation is obvious. At the point, many executives will just bury their heads in the sand, hoping for better days in the future, but this does little to solve the problem and can make it worse.

The Blue Diamond Gallery by Nick Youngson CC BY-SA 3.0 ImageCreator

 

When Steve Jobs returned to Apple in the 1990s, the tech giant was in trouble. Costs were out of control, and it had to reorganise itself to survive. Business financing was tight, and so Jobs made it a priority to cut back on everything that wasn’t making money and focus on a single breakthrough product. That product was the iPod, and it single-handedly launched the company into the consumer giant that it is today, with its raft of exciting products and unique technologies.

Jobs realised something important: to solve financial problems, especially when a company is in debt, it’s important to talk to creditors early. Creditors want their money back, and so they are usually willing to amend the terms of their agreement with you, so long as you can prove that you have a viable business. Repayment schedules can be extended, extra money loaned, and interest rates reduced, so long as you can convince them that your business plan will work.

 

Prioritise Your Outgoings

When a business is failing, it’s a good idea to create a list of your most important payables in descending order. At the top of the list should be those things that your business needs to pay to stay alive. Usually, employee salaries will be at the top here, since unpaid employees will often move on quickly to other forms of employment. Next on the list should be things like business rates and utilities: services without which your business can’t operate. Further down might be paying suppliers or external support companies, like cleaners or IT support.

Remember, in a financial crisis, you might not be able to pay everyone in full and on time. Usually paying something is a gesture of goodwill and can buy time if you have a cash flow issue.

 

Cut Costs

Pixabay

 

Just as Steve Jobs cut costs at Apple when it was failing, other CEOs in a similar position should think about doing the same. It’s easy to cut recreational spending, such as corporate away days or catering costs, before making layoffs or cutting back on certain products.