Apr 24, 2020
Since the emergence of the Covid19 pandemic, it’s evident that many businesses are going through uncertainties; be it with management, productivity, and of course, finance due to lack of funding. In fact, insufficient funding is one of the primary reasons why many businesses fail. Remember, every business has an active lifespan, and it is during times such as this that your business will experience losses. Our article today takes a look at some of the best ways you can still grow your businesses during Covid19.
For many small businesses, credit cards, loans, and other forms of debt are often seen as a double-edged sword. Loans are great, and they are relied on by many businesses to get the capital needed for their launch. The downside to this mode of capital accumulation comes when the time to repay the loan arrives.
During this period, you’ll likely have to spend most of your cash flow in the payment process, to prevent you from investing in more employees. However, using credit cards and loans for your business isn't a great idea, even more, it doesn't offer you the flexibility you need to keep up with the competition.
The best way to support your business in current times is to seek government support; in fact, a full range of business support measures have been made available to UK businesses. This includes Covid19 bail out funds, via the Coronavirus Business Interruption Loan Scheme (CBILS).
You don't necessarily need to create a new business plan, rather re-work the current one. As the saying goes, you plan to fail if you fail to plan; thus, a strong business plan is essential for success.
Your new plan should clearly state how you intend to bring in more revenue to support the business flow. Furthermore, it should be watertight and also realistic, so you won’t find your business falling deeper into depth.
If you prefer not to go down the government route, you can go private instead. However, for many businesses, one major issue concerning funding is the ability to convince investors that the business is legitimate in terms of how viable or profitable it is. However, in times such as this, finding established external investors can be tough because there are some business niches or industries that are naturally seen as risky investments.
To increase the confidence of investors in your brand and business, a couple of things must be done. You need to show that they have invested profits back into the company, and have, in turn, received higher revenue in the process.
Hopefully, when you started your business, you likely saved up to six months' worth of operational revenue. This money should be able to keep your business afloat for up to six months before it yields any profit. The six-month limit is here is logical because, for the first half of the year, many companies do not make any meaningful profit. However, if you don’t have back up funds, a loan is the way to go.
By nature, as entrepreneurs, we are mostly optimists. This trait is what enables us to withstand the pressure of owning and managing a business. We often see our business ideas as catalysts that can change the world. With such a belief, we usually have a positive outlook towards all our endeavors. The downside to our optimism is that we often create ideas that lead us to underestimate future costs and in turn overestimate potential revenues.
The result is an entirely unrealistic projection of our businesses, leading us to make poor decisions. So, to prevent business failure during Covid19, especially as a result of insufficient funds, we need to remove our dream-tinted frames and focus on reality. Only then will we be able to make accurate projections for both costs and revenues our businesses will need to thrive.
Most businesses, regardless of the stage, often struggle a lot with cash flow issues; although it's mostly experienced during the developmental stage. The trick to managing these cash flow issues is to ensure there's a fixed balance between getting cash to cover expenses through the sales made.
Losing money in your business is equivalent to bleeding out. The company will experience incapacitation, lethargy, and eventual death. But to help manage the cash flow in your temporarily fragile business, it is best to strive for higher revenue, while limiting all expenses.
Owning a business and managing your own finances can be great! It means you get to make all the decisions without asking for a second contribution or idea. On the other hand, this can drain you financially in the long run. However, sharing ownership of the business in times such as this allows you to split funding and have another source of revenue for the company in dire moments.
It is true that like funding business growth with debt, sharing ownership can be disadvantageous. Nevertheless, there are some reasons why it's a great idea to partner. Besides being a partial owner, you're assured of a continuous inflow of money to run the business no matter what may be going on with you economically.
Accountants are there to not only analyze all certified financial statements of the business, but also to establish if your business is working, and how much loss you are making during covide19. Although it might seem like an additional cost, using an accountant will likely you spot any errors before disaster strikes.
Although many people advise that it’s better to fund a business from your pocket, even duringg uncertain times; the downside is low capital investment and under-funding of businesses are not foolproof methods. In fact, they may ultimately lead to failure, especially when the cash flow required to operate the company cannot be raised.
So, if you're seeking to keep your business afloat during Covid, we advise that you study and implement the tips mentioned in this article, as they're a watertight means of achieving your business goals.
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