Most small businesses fail because they have cash flow problems, according to some recent studies. This could mean that the business was not earning anything, or that the business has a high overhead. The result is that cash flow is uneven, and the business spends more than it earns. We are all familiar with this, but is there a way to protect any business from ballooning costs? If you want to ensure that your business never files for Chapter 7 bankruptcy, then here are some things you should consider for better business management.
Look For a Better Deal
One of the first things you should be doing is to look at your current spending and checking whether you can get a better deal for them. For example, if you are renting a place, then you should look around for a better location for your business. If you did not negotiate a good deal with your landlord, then you are likely paying too much. As a good tenant, you might be able to negotiate a lower rent but don’t depend on that.
There are probably many items in your expense list that can be renegotiated. Check each one and work with the other party to lower the expense or seek another source. When you get materials, you might consider avoiding the big suppliers for your small business. This puts you in the junior position of the deal, and that usually means they dictate the prices. Start looking for smaller suppliers that you can better negotiate with.
Reduce Waste
It can be surprising at how much money a business wastes. They usually sound like a good idea at the time, but they end up being a waste. For example, you might be sending too many people out on business trips. Yes, a good trip would be able to get you a good contract or two. But then you’re paying for people’s tickets and expenses. Check and validate the expenses; look for alternatives that could lower these. Thanks to Zoom and other teleconferencing options, people now have the chance to meet with clients without spending additional expenses. There will still be a need for some personal appearances but not as many. This can save you thousands of dollars in travel expenses.
You can also find other ways to make your operations more efficient. Think about the space you are renting right now. Is it too big, or is it just enough? If you have extra space, then you likely are wasting it. You can either put it to good use or move to somewhere smaller. Do something similar to your current processes, and you will notice an increase in savings.
Don’t Hesitate To Fire People
As the boss, it can be difficult to decide on firing people. But labor is one of your biggest expenses. The salaries that you pay your employees need to be worth it. This means several things. First, you want to eliminate as much “make work” as possible. These are tasks where you are getting a low rate of return. For example, if you have a low-performing product line, you should ask yourself why it is still being made. Eliminating the product line can allow you to direct labor to something more profitable.
Second, there will be people who are redundant, or you don’t need anymore. This might seem harsh, but your employees should have the proper training to find employment somewhere else. Keeping them employed when they are not giving you any profit is a big waste.
Sell The Old
As part of the push for eliminating waste, you should look at your old items. This can range from your inventory to equipment. For example, if you still have old stock that is always on your warehouse shelves, you should be running a sale to get rid of it. It allows you to free up shelves so that you can put new products in safe storage and gets you back some money you put into producing the products.
Besides that, you need to remove old equipment and get an upgraded version or model. This is great for your operations since you will be more efficient. You have fewer expenses for repairs and maintenance. Use part of the sale to defray the cost of new equipment.
It can be surprising what mistakes small businesses make that can lead to business losses. Being careful about your expenses can ensure that your business will better survive the challenges facing it. The more money you have ready, the more you will be able to handle any cash issues that you might have. The result is that you can be sure of your business surviving in the long run.
