Saying that the present-day business world is tumultuous would be a great understatement. The last couple of years were truly taxing and with COVID-19 still looming over the entire world, the true scale of the economic crisis we are going to face is still hard to assess.
Keeping that in mind, we can say with great certainty that, regardless of their current market position, no small number of organizations are going to file for bankruptcy.
Even so, knowing the hardships are on the way is a great first step in making sure that your company is well prepared to deal with them and come out intact. So, let us take a look at a couple of simple ways to protect your business from bankruptcy and make solid foundations for the future.
Understand the common reasons for bankruptcy
The situations that can cause one company to file for bankruptcy are virtually countless. But, keeping in mind the contemporary economic outlook, some of the causes are more likely to happen than others. Let’s quickly go through some of the scenarios you should keep on your radar.
- Over-extension – The goal of every company is to grow. However, you need to avoid taking unnecessary risks and taking too much debt without absolute certainty you will be able to pay it back.
- Poor bookkeeping – The companies that don’t keep a close eye on their books often experience penalties and legal consequences able to close their doors forever.
- Unrealistic optimism – When doing the market projections and making the plans for the future, the companies should always go with the worst-case scenario and avoid unpleasant surprises further down the road.
Prevent any eventual cash flow problems
Cash flow is the blood that pumps through the veins of your organization and keeps it alive. Inability to collect the invoices and put that money back into production can cause serious threats to the survival of one company. One of the most popular solutions for dealing with this common problem comes in the form of convenient trade finance line of credit that allow you to quickly bridge the capital gaps and keep the critical operations alive. The second solution is to offer your customers incentives to pay the invoices early. If possible, you can leverage both these strategies to your advantage.
Write down a thorough business plan
A good business plan serves as a blueprint you use to build your company up and measure how well are you doing at any given moment. This document also outlines the financing, operating budgets, sets up the short-term and long-term company objectives, and defines the KPIs to measure these goals. All these important things are kept in the same place so all departments have the information necessary for making decisions beneficial to the company as a whole and have the same set of parameters they can use to track progress.
Sell unused assets and outsource what you can
Business assets, and sometimes even the entire business department, can put a heavy burden on your budget without producing revenue in any meaningful matter. So, try to get rid of all assets that are not used in an optimal manner and instead rent the tools you need when you need them. A similar thing can be said about the departments like marketing and bookkeeping that are not closely related to your core operations. Outsourcing these sectors to the third-party company and moving to a more scalable model can only make your company leaner.
Diversify and maximize income
Last but not least, we would like to remind you that in times as troublesome as these, putting all of your eggs in the same basket makes a very poor business decision. Therefore, you should really do your best to explore new sources of revenue and create new forms of value for your customers now more than ever. While you are doing that, be sure to invest most of the money in the areas that create the strongest revenue, cut operating expenses as much as possible, and put more effort into ramping up the repeat purchases that make the backbone of every successful company.
We hope these few mentions gave you some general idea about the ways you can set up your business for the economic hardships of the future and hopefully save it from bankruptcy. The outbreak of COVID-19 already took too many companies out of the game and with no end to the pandemic insight, these hardships will continue to plague the business world for quite some time. There is no need to make the position of your company any worse by making falling for the beginners’ mistakes.
