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Finance for Business
Yes, you can beat the credit squeeze!
You’d be forgiven for thinking you need a miracle right now to manage your business finance, especially in the wake of such credit tightening and rising costs. However, what you may just need is some good old fashioned business advice. There are ways to protect your business from such economic changes. But who do you go to? It should be a company or professional advisor who has been through a credit crunch before, one who has thorough market knowledge and experience. Make the most of the systems and resources available to you, to give yourself as much room to maneuver. Looking at business finance, planning, costs, marketing and your professional advisors, the following should help you on the road to beating this ‘squeeze’ and protect your business.
1. Plan Ahead – Failing to plan is planning to fail
It is vital that you have contingency plans in place so you are prepared for any kind of economic change. Plans should be considered for buoyant markets, downturns and also for when things are just plain average. Using this philosophy, you should have no need to panic in times of change and your business should remain more stable and continue to grow. Small businesses tend to put such planning on the back burner; it can be seen as low priority in relation to making sales, purchasing stock, managing staff and all the general day to day tasks. This is completely understandable – I hear you cry, I have no spare time, I hardly have time to sleep let alone plan for whether it may rain or shine sometime in the future. Entrepreneurs tend to use their gut feeling, and instincts anyway, their know-how is what manages their business, but sometimes this may mean sticking to what you’re good at. When tough times rear their head, having a plan of action and the right systems in place can be what makes or breaks your business and you may need to step well out of that ‘comfort zone’ in order to succeed. Plan for the short term, mid term and long-term, and build in flexibility with whatever you plan – be realistic.
2. Financial Flexibility – Deal with more than one bank
Arrange your financial affairs with more than one bank, so you don’t have ‘all your eggs in one basket’. You can have your current accounts, loans and overdrafts all with different institutions and your asset finance somewhere else – this will help maximize your finance options. If one bank stops lending, you can go to the others, and if one is offering high rates, you have other options of where to go – choice in the market is what you need. You will have more negotiating power and maximum borrowing potential using this strategy. You can also use different asset classes such as Hire Purchase for equipment factoring or Invoice Discounting for your debtor book. A typical scenario right now is that an entrepreneur will go to their bank and expect to be offered a good deal on a loan, especially because they’ve been banking there for years, but more often than not, they can’t help because their criteria are too tight. Relationships with your bank just cannot be assumed or depended on anymore. So the entrepreneur will then find a commercial finance broker but it may be too late. Brokers can help you find the best finance to suit you by searching the market - spread your money and your options to give yourself more chance of success.
3. Manage Your Costs – Do something different
How often do you check your costs? What costs can or should you reduce? You may not think it’s necessary – you have set up the best deals with all your suppliers, your marketing works for you and you may have a decent turnover, so ‘if it’s not broke, why fix it?’. Most businesses and the people that work in them are resistant to change; we can easily get caught in a ‘comfort zone’, we like things to be familiar. How successful do you want your business to be? Is it not worth trying something different, seeing if you can get a better deal elsewhere? When it comes to your finances and especially your loans; don’t overstretch your business - shop around until you are convinced you can ensure a healthy balance sheet.
4. Don’t feel depressed – Go out and get more sales – the harder you try the luckier you get!
How else can you increase your sales? If you work on the basis of anti-cyclical marketing, it means that when times get tough, you have to do everything you can to win more business, focus on key clients, you don’t have to spend more money. Just don’t stop marketing, on the contrary, be creative and focus on what you do best. Focus on your USP’s (Unique Selling Points) and use them to your advantage to increase business. Can you diversify? Look for opportunities – there is always new business out there. You may even wish to increase certain costs such as marketing in order to boost sales – If you have financial flexibility (see above), you will be able to increase spend in a credit crunch because you will have planned for such, and you will get better deals.
5. Don’t be afraid to ask for help – There is no such thing as a silly question
How often do you speak to your professional advisors? Don’t be afraid to ask for help and advice throughout the year. Don’t just go at year end, or at the last minute when you really need advice. The sooner you involve your accountant, solicitor, or financial advisor in your affairs, the better they will be briefed for when quick action needs to be taken. They are excellent to bounce ideas around or get a new slant on how you could improve the running of your business. You should keep in regular contact with them especially when markets are tough, but remember they are not just there for difficult times – they can also help you avoid disasters. Let them help you make the most of your business, and keep you ahead of difficult situations.
Different markets present different opportunities and changing markets will always cause a shift. Look at ways you can make the most of this period of change – how can you get ahead of your competition – what sets you apart? Focus on how and why the market needs your products and services. Protect your business through change and you can ensure healthy profits.
Please contact:
Roger Ward, ASC Director or
Jane Ridgeway
ASC Finance for Business
Berkshire and Oxfordshire
T: 01628 778227
www.asc.co.uk
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