If you are losing money, are you looking at your options before you run out of cash? If you are in this situation, do you proactively deal with a crisis and try to turn things around before it’s too late? Do you look at your cash reserves, assets and borrowing capacity early enough to make changes while you still have time to do so? Do you know how much time you have left before you will face bankruptcy?
Hopefully you are looking at your performance on a regular basis to make sure you are not in or close to a crisis mode, but if you are there, you must recognize reality, then act quickly and decisively to keep your company going.
How one gets into such a situation varies: It may be losing a major lawsuit, having to write off a large receivable, a continuous string of losing months that add up, theft or embezzlement, a bank calling your loan, or it may be simply inattention to the slow erosion of the business over a period of time. Regardless of the cause, the sooner the situation is identified, the more time you have to correct it before you run out of time and money. Then you are dealing with a crisis that requires emergency business triage to save the company from going under.
Assuming you have waited too long to take corrective action and now need emergency intervention to save your business, here are a few things to consider doing ASAP. The first one is obvious; get your staff to produce like their jobs depended upon it, then reduce your costs by getting rid of
- The first one is obvious; get your staff to produce like their jobs depended upon it, then reduce your costs by getting rid of nonperforming assets and expenses from people to facilities that don’t contribute to your overhead immediately. Next get more cash as quickly by providing a prompt payment discount and cutting prices if the incremental volume that will generate a lot more margin $.
- Get more cash as quickly by providing a prompt payment discount and cutting prices if the incremental volume that will generate a lot more margin $.
- Try to get a loan or gift to tide you over.
- Make some really tough choices from non-traditional sources — such as selling hard assets such as your home, liquidating pension plans, investments, a facility or receivable, or liquidating the company. But if your operation is so depressed, you may not have time to sell and are in a poor bargaining position anyway.
Assuming that you are in the process or turned the corner, you have the option to rebuild your company, but the longer you wait to make changes, the lower the probability of rescue. For example, if you are burning through $15,000 a month and have $60,000 in cash reserves, every week you wait reduces your chance of success by 25%, then 50%, etc. Making a decent triage-type of decision now is better than making a really good decision three weeks later.