As a small business owner, you’re going to have good days and bad days. Some days will be worse than others.
Part of coping with the darker days that come with managing your own operation is being primed and ready to handle them when they arrive.
This involves building a network of advisors around you, hiring the right team and implementing the right technology so you have all the resources to push through and come out the other side with a healthy and stable business.
Here’s how to deal with three of the worst days in a small business so your company doesn’t come crashing down while you face them.
1. The day you have to meet payroll and you can’t cover it
Cash flow is the lifeblood of a small business. If it dries up, owners face some pretty stiff decisions like not being able to pay staff, creditors or fulfill orders. Dealing with cashflow is something a small business owner needs to address long before they’re in this situation.
A recent survey of business owners we commissioned underscores the issue. When asked about the business reasons for closing down their companies, 65% of the entrepreneurs pointed to financial problems, including cash flow management.
Sometimes the broader market environment can make cash flow control particularly challenging, but veteran small business owners know they can take several steps to keep their finances on track.
Establishing an overdraft facility, emergency line of funding and setting up strict terms of trade at the get-go are all ways to ensure you’ve got a backup if cash starts to dry up. It’s much easier to access capital when you don’t need it, rather than attempting to set up these processes during your dark days.
Another important way to manage paying your staff is to ensure you get paid. Sticking to your to terms of trade and utilizing tech like Invoice Reminders can go a long way towards making sure you can pay your bills
2. The day you get the big deal and can’t fulfill it
In order to limit the bad times and boost the great moments, you should be taking risks and trying new things. If you don’t, you really aren’t growing your business at all.
For a growing company, new customers are obviously always welcome. But landing a game-changing piece of business – without preparing for a new pace of expenses – can actually do more harm than good.
Take a friend of mine. He had a great product and worked hard to make in-roads to large companies. One day it happened: a Fortune 50 company placed an order that was 10 times the size of any deal he had seen before. He lined up his supply chain and delivered the goods.
Everything was great until the bills arrived from suppliers. Some were due on receipt and others due in 30 days. The bills amounted to more cash than he had on-hand, and his customer wasn’t going to pay him for another 90 to 120 days.
Having to bridge the lag between outgoing expenses and income with high-interest rate credit cards, evaporated his entire profit margin. He learned a pretty important business lesson from the whole situation: Prepare for the big deal, negotiate with your supply chain, and ensure you have cheaper access to working capital.
3. The day you have to let someone go
Teams are usually pretty tight in a small business. More-often-than-not, your colleague doubles as a family member. It means, if you’ve got to make a difficult call and let them go, the discussion isn’t an easy one.
Over the years, I’ve had to let a few people go. I’ve also coached managers on my team through the process. The first piece of advice I hand out is not to start the conversation with “this is hard for me”. It’s much harder for the person you’re firing. Their livelihood is about to come crashing down.
When firing someone it’s best to do it as quickly and directly as possible – rip the Band-Aid off. It doesn’t get any better the longer it takes for you to do.
Be very clear. Articulate the reasons behind the decision and do not leave the meeting without the person understanding that they’ve been let go. Sounds like an obvious one but you’d be surprized how often it happens.
Business isn’t all smooth, there will be tough days. But with a little foresight and careful planning, when the tough times roll in, you’ll be armed with the right strategies to carry you through.