How do you deal with an emergency in your business? This is a question that almost all business owners face at some time or other as they struggle to grow their business. We’ve faced when building up Green Prophet over the years, and well we might all ai to have sustainable businesses, but if we can’t balance the ledger books, then we are not in business.
You could experience a financial emergency for any number of reasons: a risky deal falls through, a negative cash flow problem gets out of control, or a large client drops out all of a sudden.
Regardless of the reason, here are 5 steps you can take to get your business back on track:
1. Appraise the situation:
While your natural reaction might be to simply jump into action, sometimes taking the wrong action could make things worse. By taking a moment to sit down and think about the situation, you might come up with a simple solution. Perhaps, you could ask a family member a business friend, or a business partner to send you money via a bank transfer. If this is too slow because they live overseas, you could use an international money transfer. Or perhaps, there are certain assets—shares, for example– that you could liquidate.
By sitting down and thinking about things, you might find an ingenious way to quickly resolve the problem. Panicking won’t help you. Thinking will help you make the right choices. After thinking about the cause of the problem, you might surprise yourself with a plan of attack that directly addresses the root of the problem.
2. Rearrange your budget.
You may have the money you need to solve the problem, but not realize it. By taking a look at your budget, you might be able to postpone, eliminate, or renegotiate certain expenses to have more money available to resolve the financial emergency.
If the emergency is due to a contract gone awry, you could try to renegotiate terms. If your emergency is due to a creditor, you could ask to pay at a later date. If it’s due to a court case, you might be able to settle out of court. If it’s due to a client going to a competitor, you could renegotiate their contract to match the competitor’s price or services.
4. Get extra income.
There are many ways of getting some extra income. Here are 10 idea starters:
- 1. Use your personal savings.
- 2. Get an emergency loan from an alternative lender online.
- 3. Use a credit card.
- 4. Borrow small amounts from multiple sources.
- 5. Liquidate some business assets.
- 6. Borrow from your retirement account.
- 7. Get more clients.
- 8. Work longer hours to get more work done.
- 9. Collect on any debts.
- 10. Create new income streams
5. Buy more time.
Sometimes the emergency might be resolved by paying for something at a later time. For instance, if you can’t pay the rent on your business property for the month, you could talk to the property managers to arrange ways that you could pay later in the month because you’ll have earned the money by then
6. Ask for help
Your employees may be willing to help you out. You could, for example, ask them to take a temporary pay cut or work longer hours for the same pay and promise to make it up to them when the emergency is over
Learn from the Emergency
In business, every setback has a lesson to teach. After you’ve recovered from the emergency, take the time to evaluate how things should have been better handled in the future. If, say, your emergency was because your Microsoft Exchange server went down after a hurricane and backup tapes couldn’t restore it, then the lesson is to have a disaster recovery plan in place, like having a server in another location.
Besides learning how to do things better in the future, another takeaway is the importance of creating a rainy day fund. Quickbook explains how to create one for a business: “One of the first steps in creating an emergency fund is taking a close look at the particulars of your company, including its type and culture. While all businesses need to plan for the future, some industries face more significant risks in terms of lawsuits and legal actions. If you operate a medical practice or financial consulting firm, you probably need a larger rainy day fund than someone who runs a graphic design business.”