How to Manage Financial Pressure in a Struggling Business
If your business begins to struggle, you may have less income to keep your personal budget together, and you may be worried about the future. This can lead to an impossible spiral of higher stress, more debt, and future options that eventually leads to your business’s closure—or worse. However, if you proactively identify this financial pressure, you’ll have a chance to mitigate it, and prepare both yourself and your business for a brighter financial future.
Preparing Your Personal Finances
When on a plane in an emergency situation, you’re cautioned to put on your oxygen mask first, before helping the people around you put on their masks. This is because you need to be in competent condition to provide assistance. Similarly, you’ll need to take care of yourself before you take care of your business; managing your personal finances can instantly relieve some pressure and give you more wiggle room to make adjustments in the business.
For example, you can consider:
- Cutting unnecessary expenses. First, consider eliminating or scaling back your unnecessary expenses. How much are you currently spending on monthly subscription services? How much are you paying for unnecessary indulgences? You can reduce your lifestyle spending and greatly relieve your budget.
- Refinancing your home. If you’re eager to get more money to invest in the business, or if you need to get a lower interest rate on your mortgage, you can consider refinancing your home. It may not be a perfect option for everyone, but if it fits, and it can lower your monthly payments or provide you with more capital, it may be worth it.
- Freeing up cash. You may also use this time to free up more cash, such as by selling assets like stocks and bonds. More cash will give you more of a cushion you can use to sustain yourself in an emergency situation (like if you have to temporarily forgo your income), and possibly give you funds you can invest in the business directly.
With a better buffer and personal preparation, you’ll be better suited to handle the inconsistent income that’s likely in your future.
Preparing Your Business’s Finances
It’s also important to prepare your business’s finances for the volatility and uncertainty to come. The strategies you employ here will depend heavily on the type of business you run, the source of your financial distress, and your goals in navigating this dilemma.
For example, you could look at:
- Restructuring debt. If your loan payments or other debt-related expenses are starting to take their toll on your business, this may be the perfect opportunity to restructure your debt. Again, this isn’t an option for every business, but it could work well for those that need it.
- Prioritizing cash flow. Cash flow is the rate at which cash comes into and flows out of a business; if you’re working with tight finances, cash flow should be a priority. You can improve cash flow by employing more consistent invoicing practices, following up on past due invoices, and keeping a tight leash on outgoing payments.
- Scaling back staffing. You probably love your employees but staffing costs can cripple a business unnecessarily. You can cut back here by reducing hours, transitioning full-time employees to part-time, or by utilizing independent contractors in place of making new hires.
- Adding new streams of income. You can also improve your business’s financial health by incorporating new products or services; in other words, by adding new streams of income.
It’s also worth noting the importance of relieving stress during these trying times. As you try to juggle the responsibilities of keeping your business afloat and managing your personal finances, it’s easy to get overwhelmed.
Before succumbing to the pressure, it’s important to find ways to relieve your own stress. These can range from minor habit changes, like taking more breaks throughout the day or incorporating daily exercise into your routine, to major decisions, like taking a vacation. It may seem counterintuitive to go on vacation while you’re dealing with a crisis, but the time away can help you decompress and return to your life with renewed energy and perspective. Do whatever it takes to keep the pressure at bay; otherwise, you won’t be able to make good decisions for your personal or professional life.
One Step at a Time
No matter how brilliant your ideas are, you won’t be able to turn around a financially struggling business overnight. It’s going to take time to make the changes necessary to show improvement. Try to keep this in perspective, and take things only one step at a time. Make decisions individually, manage things day by day, and don’t let your long-term fears eclipse your short-term priorities.
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