Saving Your Business

• Why Saving Your Business Matters: Saving your business means being prepared for challenges that can come up on your path to success. When you’re prepared, you can face the problems head-on instead of being caught off guard.

• Be Proactive Not Reactive: Proactive management involves planning and acting before problems arise or become too big to handle. When you make proactive decisions, a $50 issue doesn’t become a $15,000 nightmare.

• Identify Common Challenges: Some of the most common obstacles that business owners face include poor cash flow, not watching expenses, and not being prepared for disasters.

Poor Cash Flow

Think of cash flow as the money flowing in and out of your business. When more money flows out than in, you have a problem. It's important to keep both eyes on cash flow in your business at all times. If your cash flow “dries up,” meaning you have less money coming in than out, you won't be able to pay your bills, your employees, or yourself. Remember this rule - If you don’t know where your money is going, you can’t control it.

Some ways to promote a positive cash flow position include:

• Stay on top of your invoicing. Make sure customers pay on time. Be the squeaky wheel if they are late.
• If your schedule of money flowing in and out does not provide an abundance of cash, hold off on making big purchases. For example, if you run a bakery and your oven breaks, you might want to repair it instead of buying a new one immediately if money reserves are low.
• Keep track of your expenses every month. If you don’t, you might spend more than you earn.
• Know what your fixed costs are every month, such as rent, and insurance.
• Monitor your variable costs each month to see if they have gone up or down. For example, if you own a trucking company, you want to keep an eye on gas prices. If they go up significantly, you need to adjust your budgeted amount for gas in the current and future months.
• Prepare a Cash Flow Statement each month so you can monitor and create a record of your historic and ongoing cash position.

Helpful tips for maintaining positive cash flow:

• Use separate bank accounts for personal and business related income and expenses.
• Send invoices as quickly as possible after providing your product or service.
• Use tools and techniques to monitor and control expenses. For example, using software like QuickBooks can help you keep track of every dollar spent. If you decide that keeping track of your own expenses is too difficult, then hire a bookkeeper or a bookkeeping service to do it for you.
• If your variable expenses go up and make it difficult to manage your payments and cash flow, look for practical ways to cut costs without affecting quality. Maybe you can find a cheaper supplier for your raw materials or switch to energy-saving light bulbs to cut utility bills.
• Carefully monitor your inventory and don’t buy more than you need, especially if your supplies are perishable or have a limited shelf life.
• Predict and plan for changes to your cash flow. For example, if your business is busier at certain times during the year plan your inventory, staffing, and hours accordingly.

To learn more about small business accounting, bookkeeping, cash flow management, types of business costs, and controlling costs, refer to MOBI's sessions on Accounting and Cash Flow and Controlling Costs.

Unpredictable Sales

As a small business owner, you may find it difficult to predict sales for your business. This can pose a significant challenge as ups and downs in your revenue can make it difficult to manage expenses, plan for the future, predict cash flow, and maintain business stability. For entrepreneurs and small business owners, navigating these fluctuations requires proactive strategies and flexibility to ensure the business remains resilient and sustainable even during periods when sales are slow.

Here are some tips to address unpredictable sales:

• Marketing:
  • Be consistent with your marketing efforts to continually add new customers. Provide incentives to promote loyalty, referrals, and reviews among existing customers.
  • Use social media marketing as an inexpensive way to reach and engage with target and existing customers.
  • Monitor sales trends so you know which products or services are most popular.
  • Consider flexible pricing, seasonal promotions, discounts, or coupons to encourage sales during slower times.
  • Focus on customer engagement to build loyal customers and long-term relationships.

• Financial Management:
  • Build a financial cushion by saving a portion of your revenue during peak times to create an emergency fund to cover expenses in slower times.
  • Control costs and find ways to reduce costs during slow times without compromising quality.

• Product/Service Offerings:
  • Diversify your revenue stream so you are not dependent on only one product or service.
  • Adjust inventory and product or service offers to meet market demands or seasonal fluctuations.

Unexpected Difficulties, Obstacles, and Disasters

Being ready for difficulties, obstacles, and disasters, whether natural, economic, or manmade, can save your business. Identify potential risks and disasters that could impact your business. This could be anything from a temporary power outage to a devastating flood or a cyber-attack.

Create a Disaster Preparedness Plan, also called a Business Continuity Plan. Some things to consider as part of this plan include:

• How will you maintain business operations? It’s a good idea to create a detailed plan that includes procedures for maintaining operations during an emergency (if possible), including how to handle financial, operational, and staffing disruptions. For example, if you lose power do you have a way to process transactions?
• How will you protect sensitive data? If you have an ecommerce business and conduct transactions online, how will you protect your customers’ data? Do you have a cyber security plan in place with appropriate protections and antivirus software?
• How will your employees be affected? For example, consider if you need your employees’ help for critical activities, or should they go home immediately? What training will you provide? Do you have emergency contact information for each employee?
• How will you recover from damage? Have you evaluated your risks, identified, and purchased appropriate business insurance to help you recover in the event of a disaster? Visit MOBI’s session on Business Risk and Insurance to learn about common risks and types of business insurance.
• How am I staying informed and prepared? Create a schedule to revisit your Disaster Preparedness Plan and stay informed about potential risks that could impact your business.

For example, if you own a restaurant in a flood-prone area, having flood insurance and a plan to protect your equipment can save you a lot of trouble. Write down what you need to do before a flood happens, during the flood, and then after the flood strikes your business and area. While creating this plan may involve difficult decisions or conversations, it’s best not to avoid them. Having this plan in place might save you from making bad or wrong decisions during a time when your emotions might affect your ability to think clearly. Explore how you can adapt to ongoing changes in MOBI’s session Adapting in the Midst of Change.

Being proactive means anticipating and addressing issues before they become critical. It also means you are prepared, and prepared businesses tend to survive longer.

For instance, you have a delivery company and write down the dates when each vehicle will need service so that you can schedule deliveries when the vehicles aren’t in the repair shop and you don’t have any major repairs because you forgot to have the vehicles serviced.

Here are some examples of differences between proactive and reactive management:

It can be difficult for new entrepreneurs and business owners to know how to adopt a proactive management strategy. Here are some ideas to help you get started.

• Play the “What If” Game.This game helps you anticipate potential obstacles and prepare solutions. It’s like planning for the worst but hoping for the best.
  • Some example questions include, “What if there is a fire and I lose my business?” “What if I become disabled?” “What if my largest customer leaves?” What will you do if your main supplier suddenly goes out of business?” “What if my partner no longer wants to be in business?”
  • By creating a plan to handle these scenarios effectively, you increase the possibility of saving your business when disaster strikes. Write down your answers and keep them in a place where you can easily find them if something happens. Note: Your “what if” response plan can also be called a backup plan, contingency plan, or your plan B.

• Use Smart Financial Management. Review and adjust your budget on a regular basis to reflect changes in revenue, expenses, and financial goals. Review your cash flow position regularly, and predict and plan for changes. Invest in accounting, bookkeeping, and financial management software if that will be helpful for your business or hire a bookkeeper and/or accountant.

• Plan for Risks. Brainstorm the risks that could impact your business, this could be a version of the “What If” game where you consider all potential risks and not just the worst case scenarios. Investigate and purchase insurance appropriate for your business to cover your most likely risks. Train employees on the parts of your Disaster Preparedness Plan that will affect them, or for which you need their help.

• Keep an Eye on Your Ecosystem. Your business ecosystem includes all the people and groups that interact with your business, for example your employees, your suppliers, your investors, your customers, and your competitors. By monitoring changes in your ecosystem you can anticipate opportunities or threats to your business.

• Embrace Adaptability. Changes in your ecosystem or the market may require a change in your business as well. Proactive management allows you to pivot, or adapt to changes.

• Encourage Innovation. Whether innovating your product or service or your business operations, continuous improvement can put your business in a favorable position to meet unexpected challenges. Innovation can also be a source for new opportunities and adaptability.

• Foster Relationships. Building long-lasting relationships with your ecosystem can help save your business in difficult times. For example, a long-term supplier may give you an extension on an invoice, or perhaps a discount if you have a temporary shortfall of cash.

Once you have your contingency plan in place, be proactive about managing your business. Write a daily agenda with goals that you want to achieve for the day. Don’t let other people steal your time by having you work on their agenda. Trouble usually starts when you get caught up in addressing problems as they arise and can’t find time to pay attention or plan for the important things you need to get done in your business. Whether they’re urgent or not urgent make time for your agenda and proactive management.

Regularly review and update the plan for achieving your goals. This will help you stay on top of potential problems as well as opportunities. Use feedback from employees and customers to improve the way you do business. The more you get into a routine of planning, executing, reviewing, making changes and then doing it all over again, the less chance you have of something serious going wrong in your business. Your goal is to keep small problems as small as possible while taking advantage of big opportunities.

• Essential Steps to Save Your Business: Review financial management, expense tracking, and disaster preparedness.

• Be Proactive: Anticipate obstacles, problems, and opportunities to lessen your down time and to take advantage of opportunities to grow your business.

• Play the “What If” Game: Use this game to anticipate potential obstacles. Such as “What if I become disabled?”

• Create a Contingency Plan: The answers from the “What If” game become the foundation of your contingency plan. What’s your backup plan is written, make sure to test it (with different scenarios).

• Build a Proactive Business Mindset: Adopt a proactive approach and the importance of continuous improvement.

THE TOP 10 DO'S

1. Monitor your cash flow and expenses closely.
2. Hold off on making big purchases if your cash flow is tight.
3. Develop contingency plans for potential obstacles.
4. Keep an eye on your business ecosystem to be aware of potential opportunities and threats.
5. Play the “What if” game to anticipate challenges.
6. Adjust your marketing strategies for inconsistent or unpredictable sales.
7. Create a Disaster Preparedness Plan so you don’t have to make important decisions in an emotional situation.
8. Be proactive rather than reactive in managing your business.
9. Identify potential risks to your business and purchase insurance as appropriate.
10. Keep small problems as small as possible while taking advantage of big opportunities.

If you are currently writing or have developed a business plan, consider taking a moment now to include any information about your business related to this session. As a reminder, MOBI’s free Business Plan Template and other worksheets, checklists, and templates are available for you to download. Just visit the list of MOBI Resource Documents on the Resources & Tools page of our website.